emerging display technologies corp 2015 consolidated... · emerging display technologies corp. and...

1

(English Translation of Financial Report Originally Issued in Chinese )

EMERGING DISPLAY TECHNOLOGIES CORP. AND

SUBSIDIARIES

Consolidated Financial Statements

December 31, 2015 and 2014

(With Independent Auditors’ Report Thereon)

Address: No. 5, Central 1st Rd., Kaohsiung Export Processing

Zone, Kaohsiung, Taiwan, R.O.C.

Telephone: 886-7-812-4832

2

Table of contents

Contents Page

1. Cover page 1

2. Table of contents 2

3. Independent auditor’s report 3

4. Consolidated balance sheets 4

5. Consolidated statements of comprehensive income 5

6. Consolidated statements of changes in equity 6

7. Consolidated statements of cash flows 7

8. Notes to the consolidated financial statements 8

(1) Organization and business scope 8

(2) Financial statements authorization date and authorization process 8

(3) New standards Application of New and Revised International Financial Reporting

Standards and Interpretations

8～10

(4) Summary of significant accounting policies 10～24

(5) Significant Accounting Judgments, Estimates, and Assumptions, and Sources of

Estimation Uncertainty

24

(6) Explanation of significant accounts 24～49

(7) Transactions with Related Parties 49

(8) Pledged assets 50

(9) Commitments and contingencies 50

(10) Losses due to major disasters 50

(11) Significant subsequent events 50

(12) Others 50

(13) Supplementary Disclosure Requirements

(a)Information on significant transactions

(b)Information on investees

(c)Information on investment in Mainland China

51～54

55

56～57

(14) Segment information 57～59

3

Independent Auditors’ Report The Board of Directors Emerging Display Technologies Corp. We have audited the accompanying consolidated balance sheets of Emerging Display Technologies Corp. (the Company) and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the year 2014 financial statements of EDT-Europe ApS, which reflect the total assets of $8,920 thousand representing 0.25% of the Company’s consolidated total assets as of December 31, 2014 and which reflect the net sales of $278 thousand, representing 0.01% of the Company’s consolidated net sales for 2014. The year 2014 financial statements of EDT-Europe ApS were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts above, is based solely on the report of the other auditors. We conducted our audits in accordance with the “Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants” and the auditing standards generally accepted in the Republic of China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated financial position of Emerging Display Technologies Corp. and subsidiaries as of December 31, 2015 and 2014 and the results of their consolidated operations and consolidated cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the International Financial Reporting Standard, International Accounting Standards, interpretation as well as related guidance translated by Accounting Research and Development Foundation endorsed by the Financial Supervisory Commission of the Republic of China with the effective dates. We have also audited the standalone balance sheets of Emerging Display Technologies Corp. as of December 31, 2015 and 2014, and the related statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2015 and 2014, on which we have issued modified unqualified audit report. KPMG CPA: Potree Yang and David Chen Kaohsiung, Taiwan, R.O.C. March 10, 2016

Note to Reader

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with the International Financial Reporting Standards approved by the R.O.C. Financial Supervisory Commission and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors’ report and consolidated financial statements, the Chinese version shall prevail.

EMERGING DISPLAY TECHNOLOGIES CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

See accompanying notes to consolidated financial statements. 4

2015.12.31 2014.12.31

ASSETS Amount % Amount %

CURRENT ASSETS:

Cash and cash equivalent (Note 6(a)) $ 963,257 26 767,063 22

Financial assets at fair value through profit or loss

(Note 6(b))

50,130

1

61,642

2

Available-for-sale financial assets current (Note 6(c)) 614,734 16 490,603 14

Bond investments without active market-current

(Notes 6(d) and 8)

1,014

-

1,005

-

Accounts receivable, net (Note 6(f)) 454,735 12 432,224 12

Other receivables (Note 6(f)) 18,082 1 15,984 -

Current tax assets (Note 6(q)) 2,601 - 1,322 -

Inventories (Note 6(g)) 830,814 22 840,780 24

Other current assets (Note 6(l)) 33,410 1 26,106 1

Total current assets 2,968,777 79 2,636,729 75

NONCURRENT ASSETS:

Financial assets carried at cost-noncurrent (Note 6(e)) 185,000 5 185,000 5

Property, plant and equipment (Notes 6(i) and 8) 537,810 14 613,560 17

Investment Property (Notes 6(j) and 8) 17,407 1 17,768 1

Intangible assets (Note 6(k)) 3,525 - 2,957 -

Deferred tax assets (Note 6(q)) 38,751 1 82,773 2

Prepayments on purchase of equipment - - 854 -

Other non-current financial assets

(Notes 6(d) and 6(f))

9,663

-

10,051

-

Total noncurrent assets 792,156 21 912,963 25

TOTAL $ 3,760,933 100 3,549,692 100

2015.12.31 2014.12.31

LIABILITIES AND EQUITY Amount % Amount %

CURRENT LIABILITIES:

Short-term loans (Notes 6(m) and 8) $ 599,286 16 30,631 1

Notes payable 3,193 - 3,823 -

Accounts payable 365,174 10 400,258 11

Other payables (Note 6(p)) 271,943 7 230,574 7

Current tax liabilities (Note 6(q)) 1,463 - 2,960 -

Long-term loans, current portion (Note 6(n) and 8) 72,800 2 72,800 2

Other current liabilities 25,135 1 21,205 1

Total current liabilities 1,338,994 36 762,251 22

NONCURRENT LIABILITIES

Long-term loans (Notes 6(n) and 8) 218,400 6 564,200 16

Deferred tax liabilities (Note 6(q)) 2,539 - 3,315 -

Net Defined Benefit liabilities-noncurrent (Note 6(p)) 84,771 2 87,162 2

Other non-current liabilities, others 160 - 171 -

Total noncurrent liabilities 305,870 8 654,848 18

Total liabilities 1,644,864 44 1,417,099 40

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF

THE PARENT (Note (r))

Capital stock 2,149,076 57 2,261,076 64

Capital surplus 27,955 1 6,294 -

Accumulated deficit 216,937 6 (56,128) (2)

Other equity interest (99,001) (3) (36,892) (1)

Treasury shares (259,140) (7) (122,282) (3)

Total equity attributable to shareholders of parent 2,035,827 54 2,052,068 58

Non-controlling interests 80,242 2 80,525 2

Total equity 2,116,069 56 2,132,593 60

TOTAL $ 3,760,933 100 3,549,692 100

5


Consolidated Statements of Comprehensive Income

For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

2015 2014

Amount % Amount %

Operating revenue (Note 6(t)) $ 3,476,757 100 3,919,890 100

Operating cost (Note 6(g&p)) 2,782,848 80 3,352,174 85

Gross profit 693,909 20 567,716 15

Operating expenses (Note 6(p)):

Selling expenses 213,551 6 227,503 6

General and administrative expenses 146,175 4 141,804 4

Research and development expenses 100,149 3 85,101 2

459,875 13 454,408 12

Net other income (Note 6(v)) 1,094 - 1,094 -

Operating profit 235,128 7 114,402 3

Non operating income and expenses(Note 6(w)):

Other income 19,137 - 18,753 -

Other gains and losses, net 79,015 2 99,572 3

Finance costs, net (16,136) - (19,572) -

82,016 2 98,753 3

Profit before tax 317,144 9 213,155 6

Total tax expense (Note 6(q)) 50,507 1 43,162 1

Net profit 266,637 8 169,993 5

Other comprehensive income

Items that will not be reclassified to profit or loss:

Remeasurements from defined benefit plans (Note 6(p)) 794 - (3,385) -

Income tax related to items that will not be reclassified subsequently

- - - -

794 - (3,385) -

Items that will be reclassified into profit or loss:

Foreign currency translation difference (Note 6(r)) 1,316 - 8,448 -

Unrealized gain (loss) on available-for-sale financial assets (Note 6(x)) (66,938) (2) 4,220 -

Less: Income tax related to items that will be reclassified subsequently

(Note 6(q))

(2,570)

-

-

-

(63,052) (2) 12,668 -

Other comprehensive income, net (62,258) (2) 9,283 -

Comprehensive income $ 204,379 6 179,276 5

Profit (loss) attributable to:

Shareholders of parent $ 265,977 8 170,881 5

Non-controlling interests 660 - (888) -

$ 266,637 8 169,993 5

Comprehensive income (loss) attributable to:

Shareholders of parent $ 204,662 6 180,021 5

Non-controlling interests (283) - (745) -

$ 204,379 6 179,276 5

Earnings per share (Note 6(s))(expressed in New Taiwan dollars)

Basic earnings per share $ 1.25 0.79

Diluted earnings per share $ 1.24 0.79

See accompanying notes to consolidated financial statements.

6


Consolidated Statements of Changes in Stockholders’ Equity

For the years ended December 31, 2015 and 2014

(expressed in thousands of New Taiwan dollars)

Equity attributable to shareholders of parent

Other equity interest Total equity

Foreign currency

translation

differences

Unrealized gain(loss)

on available-for-sale

financial assets

attributable to

Shareholders of

parent

Common Capital Retained Treasury Non-controlling Total

stock surplus earnings stock interests Equity

Balance as of January 1, 2014 $ 2,261,076 6,294 (223,624) (140) (49,277) (122,282) 1,872,047 81,270 1,953,317

Net profit in 2014 - - 170,881 - - - 170,881 (888) 169,993

Other comprehensive income in 2014 - - (3,385) 8,273 4,252 - 9,140 143 9,283

Total comprehensive income in 2014 - - 167,496 8,273 4,252 - 180,021 (745) 179,276

Balance as of December 31, 2014 2,261,076 6,294 (56,128) 8,133 (45,025) (122,282) 2,052,068 80,525 2,132,593

Net profit in 2015 - - 265,977 - - - 265,977 660 266,637

Other comprehensive income in 2015 - - 794 1,399 (63,508) - (61,315) (943) (62,258)

Total comprehensive income in 2015 - - 266,771 1,399 (63,508) - 204,662 (283) 204,379

Capital surplus used to offset deficit - (6,294) 6,294 - - - - - -

Repurchase of treasury stock - - - - - (220,903) (220,903) - (220,903)

Cancellation of treasury stock - 27,955 - - - 84,045 - - -

Balance as of December 31, 2015 $ 2,149,076 27,955 216,937 9,532 (108,533) (259,140) 2,035,827 80,242 2,116,069

See accompanying notes to consolidated financial statements.

7


Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

2015 2014

Cash flows from operating activities: Profit before tax $ 317,144 213,155 Adjustments :

Income and expenses having no effect on cash flows: Depreciation expense 128,508 191,419 Amortization expense 970 946 Provision for bad debt expense (1,147) 19,641 Net gain on financial assets or liabilities at fair value through profit or loss (9,430) (3,722) Interest expense 16,136 19,572 Interest income (4,991) (7,355) Dividend income (13,756) (8,637) Gain on disposal of property, plant and equipment (844) (1,505) Gain on disposal of investments (20,362) (35,707) Unrealized foreign exchange loss (gain) (23,857) (23,716) Total adjustments to reconcile profit (loss) 71,227 150,936 Changes in operating assets and liabilities

Net changes in operating assets: Financial assets held for trading - 11,896 Accounts receivable (9,045) 196,121 Other receivable (2,340) 13,798 Inventories 15,618 59,669 Other current assets (8,906) (886)

Total net changes in operating assets (4,673) 280,598 Net changes in operating liabilities:

Financial liabilities held for trading - (9,872) Notes payable (631) 2,069 Accounts payable (38,292) (131,243) Other payables 31,466 11,228 Other current liabilities 3,138 (21,549) Net defined benefit liability (1,597) (1,759) Other operating liabilities (11) (137) Total net changes in operating asset and liabilities (5,927) (151,263) Total adjustments 60,627 280,271 Cash generated from operating activities 377,771 493,426 Interest received 5,395 7,394 Dividends received 13,756 8,637 Interest paid (14,830) (17,215) Income taxes paid (7,387) (5,296) Net cash flows from operating activities 374,705 486,946 Cash flows from investing activities: Acquisition of financial assets designated upon initial recognition as at fair value

through profit or loss (105,639) -

Proceed from disposal of financial assets designated upon initial recognition as at fair value through profit or loss

126,581 2,408

Acquisition of available-for-sale financial assets (528,132) (718,798) Proceeds from disposal of available-for-sale financial assets 357,426 468,947 Acquisition of bond investments without active market (9) - Procced of disposal of bond investments without active market - 9,325 Acquisition of property, plant and equipment (44,211) (48,663) Proceeds from disposal of property, plant and equipment 1,152 1,629 Acquisition of intangible assets (1,538) (769) Decrease (increase) in other financial assets 281 1,004 Increase in prepayments on purchase of equipment (7,319) (8,474) Net cash used in investing activities (201,408) (293,391) Cash flows from financing activities: Increase (decrease) in short-term loans 568,655 (160,859) Repayments of long-term loans (345,800) (23,000) Treasury stock acquired (209,804) - Net cash provided by (used in) financing activities 13,051 (183,859) Effects of changes in foreign exchange rates 9,846 10,938

Net increase in cash and cash equivalents 196,194 20,634 Cash and cash equivalents at beginning of year 767,063 746,429

Cash and cash equivalents at end of year $ 963,257 767,063

See accompanying notes to consolidated financial statements


Notes to consolidated financial statements

8

(Continued)

For the years ended December 31, 2015 and 2014

(all amounts expressed in thousands of New Taiwan dollars, unless otherwise specified)

(1) Organization and Business Scope

Emerging Display Technologies Corp. (the Company) was incorporated as a limited liability company

under the laws of the Republic of China (ROC) on September 23, 1994. The address of its registered

office and principal place of business is No.5, Central 1st Rd, Kaohsiung Economic Processing Zone,

Kaohsiung City, Taiwan. The Consolidated financial statements of Emerging Display Technologies Corp.

as of and for the years ended December 31, 2016 and 2015 comprise Emerging Display Technologies

Corp. and its subsidiaries (the Group). The Group is engaged in the manufacture and sale of Capacity

Touch Panel and liquid crystal displays (LCDs).

(2) Financial Statements Authorization Date and Authorization Process

The consolidated financial statements were authorized for issuance by the Board of Directors on March 10,

2016.

(3) Application of New and Revised International Financial Reporting Standards and Interpretations

(a) The impact that adopted New Standards and Interpretations issued and endorsed by the Financial

Supervisory Commissions R.O.C. (“FSC”) but not yet in effect.

In accordance with Rule No. 1030010325 issued by the Financial Supervisory Commission (“FSC”)

on April 3, 2015, companies listed for trading on the stock exchange or over-the-counter market or for

registration as emerging stock should adopt the 2014 IFRSs (excluding IFRS 9 Financial Instruments)

endorsed by the FSC beginning in 2015. The new standards, amendments and interpretations which

were announced by the International Accounting Standard Board (“IASB”) are as follows:

New, Revised or Amended Standards and Interpretations

Effective date per IASB

Amended IFRS 1 “Limited Exemption from Comparative IFRS 7

Disclosures for First-time Adopters”

July 1, 2010

Amended IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates for

First-time Adopters”

July 1, 2011

Amended IFRS 1 “Government Loans”

January 1, 2013

Amended IFRS 7 “Disclosures—Transfers of Financial Assets

July 1, 2011

Amended IFRS 7“Disclosures—Derecognition of Financial Assets and

Financial Liabilities”

January 1, 2013

IFRS 10 “Consolidated Financial Statements”

January 1, 2013 (effective date

for investment entity will be

January 1,2014)

IFRS 11 “Joint Arrangements”

January 1, 2013

IFRS 12 “Disclosure of Interests in Other Entities”

January 1, 2013

IFRS 13 “Fair Value Measurement”

January 1, 2013

Amended to IAS 1“Presentation of Items of Other Comprehensive

Income”

July 1, 2012

Amended IAS 12 ” Deferred Tax: Recovery of Underling Assets”

January 1, 2012

Amendment to IAS 19 “Employee Benefits”

January 1, 2013

Amendment to IAS 27 “Separate Financial Statement”

January 1, 2013



9

(Continued)


Effective date per IASB

Amended IAS 32 “Financial Assets and Liabilities Offsetting”

January 1, 2014

IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”

January 1, 2013

After the evaluation, the Group believes that applying the 2013 IFRSs will not cause any significant

changes in the consolidated financial statements, except for the following:

1. IAS 1 “Presentation of Financial Statements”

The primary amendment of IAS 1 requires profit or loss and other comprehensive income to be

presented together. It also requires entities to group items presented in other comprehensive income

based on whether they are potentially reclassify to profit or loss subsequently, as well as all tax

associated with items presented before tax to be shown separately for each of the two groups of

other comprehensive income items. The Group follows the amendment of IAS 1 to present its

comprehensive income statement and the comparison period had been presented accordingly.

2. IFRS 12 “Disclosure of Interests in Other Entities”

The Group will disclose the information regarding subsidiaries(Please refer to Note 6(h)).

3. IFRS 13 “Fair Value Measurement ”

IFRS 13 establishes a single source of guidance for fair value measurement and disclosures about

fair value measurement. It defines fair value, establishes a framework for measuring fair value, and

requires disclosures about fair value measurement. The Company has disclosed the additional fair

value information in accordance with the amendments (please refer to Note 6(y)), and postponed the

application of the standard to measure the fair value by following the transitional requirement. There

is no need to provide the comparative-period information for newly disclosed items. The

measurement requirements of IFRS 13 have been applied since 2015 but there’s no significant effect

for the Group’s fair value measurement of assets and liabilities’ items.

(b) IFRSs issued by IASB but not endorsed by FSC

Below summarized the standards that issued by International Accounting Standards but the new

issued, amended standards and Interpretations which not yet approved by the FSC:


Effective date per IAS

IFRS 9 “Financial Instruments”

January 1, 2018

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets

between an Investor and its Associate or Joint Venture”

Effective date to be

determined by IASB

Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities:

Applying the Consolidation Exception”

January 1, 2016

Amendments to IFRS 11 “Accounting for Acquisitions of Interests in

Joint Operations”

January 1, 2016

IFRS 14 “Regulatory Deferral Account”

January 1, 2016

IFRS 15 “Revenue from Contracts with Customers”

January 1, 2018

IFRS 16 “Lease” January 1, 2019

Amendment to IAS 1 “Disclosure Initiative”

January 1, 2016

Amendments to IFRS 7 “Disclosure Initiative” January 1, 2017



10

(Continued)


Effective date per IAS

Amendments to IAS16 and IAS 38 “Clarification of Acceptable

Methods of Depreciation and Amortization”

January 1, 2016

Amendments to IAS16 and IAS 41 “Agriculture: Bearer Plants”

January 1, 2016

Amendments to IAS 19 “Defined Benefit Plans: Employee

Contributions”

July 1, 2014

Amendment to IAS 27 “Equity Method in Separate Financial

Statements”

January 1, 2016

Amendments to IAS 36: Recoverable Amount Disclosures for

Non-Financial Assets

January 1, 2014

Amendments to IAS 39 “Novation of Derivatives and Continuation of

Hedge Accounting”

Annual improvement cycle 2010-2012 and 2011-2013

International financial report annual improvement 2012-2014

January 1, 2014

July 1,2014

January 1, 2016

IFRIC 21 “Levies”

January 1, 2014

The Group is evaluating the impact on financial position and financial performance of the initial

adoption of the above mentioned standards or interpretations. The results thereof will be disclosed

when the Group completes its evaluation.

(4) Summary of Significant Accounting Policies

The significant accounting policies have been applied consistently to all periods presented in these

consolidated financial statements.

(a) Statement of compliance

These consolidated annual financial statements have prepared in accordance with the Regulations

Governing the Preparation of Financial Reports by Securities Issuers (hereinafter, referred to as the

Regulations) and the International Financial Reporting Standards, International Accounting Standards,

IFRIC Interpretations and SIC Interpretations endorsed by the FSC (hereinafter, referred to as the IFRS

endorsed by the FSC).

(b) Basis of preparation

(i) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the

following significant items:

1. Financial instruments at fair value through profit or loss are measured at fair value (including

derivative financial instruments);

2. Available-for-sale financial assets are measured at fair value;

3. The defined benefit liability is recognized as the present value of the defined benefit obligation,

less the fair value measurement of pension fund assets.

(ii) Functional and presentation currency

The functional currency of each entity is determined based on the primary economic environment in

which the entity operates. The consolidated financial statements are presented in New Taiwan

dollars, which is the Group’s functional currency. All financial information presented in New

Taiwan dollars has been rounded to the nearest thousand.



11

(Continued)

(c) Basis of consolidation

(i) Principle of preparation of the consolidated financial statements

The accompanying consolidated financial statements include the accounts of the Group and all

directly owned subsidiaries of the Group. The investor controls an investee when it is exposed, or

has rights, to variable returns from its involvement with the investee and has the ability to affect

those return through its power over the investee.

The financial statements of subsidiaries are included in the consolidated financial statements from

the date that the Group’s control commences until the date that control ceases. Intercompany

balances and transactions, and any unrealized income and expenses arising from intercompany

transactions are eliminated in preparing the consolidated financial statements. Subsidiaries

contribute total comprehensive income to the owners of the parent and to the non-controlling

interests even if this results in the non-controlling interest having a deficit balance.

Financial statements of subsidiaries had been adjusted to use uniform accounting policies as the

Group.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are

accounted for as equity transactions. Any difference between the amount by which the

non-controlling interests are adjusted and the fair value of the consideration paid or received is

recognized directly in equity and attributed to the owners of the parent.

(ii) Subsidiaries included in the consolidated financial statements are as follows:

Name of the Name of the Business Percentage Ownership

investor Subsidiary Activity 2015.12.31 2014.12.31 Remarks

The Company Emerging Display

Technologies Co., U.S.A.

Sale of CTP and LCDs 100% 100%


International (Samoa)

Corp.

Investment holding 78.49% 78.49%

The Company EDT-Europe ApS Sale of CTP and LCDs 100% 100%

The Company Tremendous Explore Corp.

Trading 100% 100%


Technologies Korea

Sale of CTP and LCDs 100% 100%

The Company EDT-Japan Corp. Sale of CTP and LCDs 100% 100%

The Company Ying Dar Investment

Development Corp.

Investment 100% 100%

The Company Bae Haw Investment

Development Corp.

Investment 100% 100%

The Company Ying Cheng Investment

Corp.

Investment 52.50% 52.50%

Ying Dar

Investment

Development

Corp.

Emerging Display


Corp.


Bae Haw

Investment

Development

Corp.

Emerging Display


Corp.




12

(Continued)

Name of the Name of the Business Percentage Ownership

investor Subsidiary Activity 2015.12.31 2014.12.31 Remarks

Emerging Display

International

(Samoa) Corp

Dong Guan Emerging

Display Limited

Manufacturing of CTP and

LCDs

100% 100%

(iii) Subsidiaries which are not included in the consolidated financial statements: None.

(d) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period adjusted for the effective interest and payments during the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

Foreign currency differences arising from retranslation are recognized in profit or loss, except for the translation differences of available-for-sale equity instrument which are recognized in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustment arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group’s functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of any part of its interest in a subsidiary, association or join venture that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income.

(e) Classification of current and non-current assets and liabilities

An asset is classified as current when:

1. The asset is expected to be realized or is intended to be sold or consumed in the normal operating cycle;

2. The asset is held primarily for the purpose of trading;

3. The asset is expected to be realized within twelve months after the reporting period; or

4. The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.



13

(Continued)

All other assets are classified as non-current.

A liability is classified as current when:

1. The liability is expected to be settled in the normal operating cycle;

2. The liability is held primarily for the purpose of trading;

3. The liability is due to be settled within twelve months after the reporting period even though the refinancing loan is settled or the payment term is renegotiated after the balance sheet date but prior to the report date; or

4. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issuance of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and bank deposits that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. The time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations rather than for investment or other purposes should be recognized as cash equivalents.

(g) Financial instruments

Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.

(i) Financial assets

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets.

1. Financial assets at fair value through profit or loss

A financial asset is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition.

Financial assets are classified as held-for-trading if they are acquired principally for the purpose of selling or repurchase in the short term. A financial asset that meets one of the following conditions will be designated as measured at fair value through profit or loss:

a. Such designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or

b. The financial asset is managed and its performance is evaluated on a fair value basis, or

c. A hybrid instrument contains one or more embedded derivatives.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value subsequently, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss, and are accounted for under other gain and loss. A regular way purchase or sale of financial assets is accounted for using trade-date accounting.



14

(Continued)

Financial assets in this category that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost, less, any impairment losses, and they are classified as financial assets carried at cost.

2. Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories of financial assets. At initial recognition, available-for-sale financial assets are recognized at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, these financial assets are measured at fair value and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on monetary assets, are recognized in other comprehensive income and presented under fair value reserve in equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using trade-date accounting.

Financial assets in this category that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost, less, any impairment losses, and they are classified as financial assets carried at cost.

Dividend income is recognized in profit or loss on the date when the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date; such dividend income is recognized in profit or loss, under other income.

Interest income of bonds investment is recognized in profit or loss, under other income.

3. Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables and debt investments without an active market; such assets are recognized initially at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less, any impairment losses other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets is accounted for using trade-date accounting.

Interest income is recognized in profit or loss, under other income.

4. Impairment of financial assets

A financial asset which is not measured at fair value is impaired if, and only if, there is any objective evidence of impairment as a result of one or more events (a loss event) that occurred subsequent to the initial recognition of the asset and that loss event (or events) has an impact on the future cash flows of the financial assets that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, indications that a debtor or issuer will enter bankruptcy; adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. Besides, for available-for-sale financial assets, a significant or prolonged decline in the fair value of the equity investment below its cost is also considered to be objective evidence of impairment.

Accounts receivable are assessed for impairment on a collective basis even if there is no objective evidence of impairment individually. Objective evidence of impairment for a portfolio of receivables could include the Corporation and its subsidiaries’ past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.



15

(Continued)

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset carried at cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at a similar asset’s market rate of return. A subsequent reversal of such impairment loss is not allowed.

The carrying amount of a financial asset is reduced for an impairment loss except for trade receivables, whose impairment loss is reflected through an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amounts of allowance account are recognized in profit or loss.

An impairment loss in respect of an available-for-sale financial instrument is recognized in profit or loss to the extent of the amount of accumulated gain or loss recognized in equity.

If, in a subsequent period, the amount of the impairment loss of a financial asset measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed and recognized in profit or loss to the extent of the amount of impairment loss recognized in prior years.

Impairment losses recognized on an available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and is accumulated in equity. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed to the extent of the amount of the reversal recognized in profit or loss.

Any subsequent recovery of a written-off receivable is charged to the allowance account. Changes in the allowance account are recognized in profit or loss. Impairment losses and recoveries are recognized in profit or loss under administrative expenses for accounts receivable and other gains and losses for other financial assets.

5. Derecognition of financial assets

Financial assets are derecognized when the contractual rights of the cash inflow from the asset are terminated, or when all the risks and rewards of ownership of the financial assets are substantially transferred.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity is recognized in profit or loss, and is included in other gains and losses.

On partial derecognition of a financial asset, the difference between the carrying amount allocated to the part derecognized and the sum of the consideration received or receivable for the part derecognized and any cumulative gain or loss that had been recognized in other comprehensive income shall be recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts.



16

(Continued)

(ii) Financial liabilities and equity instruments

1. Classification of debt or equity instruments

Debt or equity instruments issued are classified as financial liabilities or equity in accordance to the substance of the contractual agreement.

Equity instruments include shares and any other instrument that evidences a residual interest in any entity. Equity instruments issued are recognized as the amount of consideration received, less, the direct cost of issuing.

Compound financial instruments issued comprise convertible bonds that can be converted into share capital at the option of the holder when the number of shares to be issued is fixed.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially based on the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated between the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest related to a financial liability is recognized in profit or loss, and is included in finance costs or other gains or losses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

2. Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held-for-trading or if it is designated as such on initial recognition.

Financial liabilities are classified as held-for-trading if they are acquired principally for the purpose of selling or repurchasing in the short term. A financial liability that meets one of the following conditions will be designated as measured at fair value through profit or loss:

a. Such designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or

b. The liability is managed and its performance is evaluated on a fair value basis, or

c. A hybrid instrument contains one or more embedded derivatives.

Financial liabilities in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value subsequently, and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in other gains and losses.

Financial liabilities at fair value through profit or loss measured at cost, which are recognized as “financial liabilities carried at cost”, include obligations to deliver equity investments that do not have any quoted price borrowed by a short seller.



17

(Continued)

3. Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise borrowings, accounts payable and other payables, are measured at fair value plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial, recognition, these financial liabilities are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in finance costs.

4. Derecognition of financial liabilities

A financial liability is derecognized when its contractual obligation has been discharged or cancelled or has expired. The difference between the carrying amount of a financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in other gains and losses.

5. Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Group has legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(iii) Derivative financial instruments, including hedge accounting

Derivative financial instruments are held to hedge foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized as other gains and losses in profit or loss. For hedge derivatives determined to be an effective hedge, the timing of recognition of related gain or loss is determined based on the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset; otherwise, it is classified as a financial liability.

For derivatives links to investments in equity instruments that do not have any quoted market price in an active market and must be settled by delivery of such unquoted equity instruments; such derivatives that are classified as financial assets are measured at amortized cost, less, impairment loss, and are included in the financial assets measured at cost; and such derivatives that are classified as financial liabilities are measured at cost, and are included in financial liabilities measured at cost.

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and the embedded derivatives are not closely related, and the host contract is measured as at fair value through profit or loss.

(h) Inventories

Inventories are measured individually at the lower of cost and net realizable value. The cost of inventories includes all necessary costs of purchase, costs of conversion, and other costs in bringing the inventories to a salable and useable location and condition. The production overhead is allocated to the finished goods and work in progress based on the normal capacity of production facilities.

Net realizable value is determined based on the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses at the end of the period.



18

(Continued)

(i) Investment Property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, for use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair value.

The depreciable amount of an asset is determined after initial measurement. Depreciation methods, useful lives, and residual values are measured in conformity with the regulation of property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(j) Property, plant and equipment

(i) Recognition and measurement

Property, plant and equipment are measured at cost, less, accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of the significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over the asset’s useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

Land has an unlimited useful life, and therefore, is not depreciated.

The estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment are as follows:

Buildings 2~55 years Machinery and equipment 2~10 years Furniture and fixtures 3~10 years Other equipment 1~10 years

Depreciation methods, useful lives, and residual values are reviewed at each fiscal year-end. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate.



19

(Continued)

(iv) Reclassification to investment property

The property is reclassified to investment property at its carrying amount when the use of the property changes from private to investment property.

(k) Leases

(i)The company as Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term.

(ii)The company as Lessee

Leases in which the Company does not assume substantially all of the risks and rewards of ownership are classified as operating leases. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(l) Intangible assets

(i) Recognition and measurement

Intangible assets, other than goodwill, acquired are measured at cost, less, accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

The amortizable amount is the cost of an asset, less, its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

Patents 9~20 years

Computer software cost 1~7 years

Others 5 years

The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at reporting date. Any change shall be accounted for as changes in accounting estimates.

(m) Impairment of non-derivative financial assets

The Group assesses non-derivative financial assets, except inventories and deferred tax assets, at each reporting date to see if there is an indication of impairment. The impairment loss is determined based on an asset’s recoverable amount. If it is not possible to determine the recoverable amount (fair value, less, costs to sell and value in use) for an individual asset, then the Company will have to determine the recoverable amount for the asset’s cash-generating unit (CGU).

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use are required to be tested at least annually.



20

(Continued)

The recoverable amount for an individual asset or a CGU is the higher of its fair value, less, costs to

sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying

amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is

accounted for as an impairment loss. An impairment loss shall be recognized immediately in profit or

loss.

For the purpose of impairment testing, goodwill acquired in a business combination shall be allocated

to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are expected to

benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the

acquire are assigned to those units or group of units. If the carrying amount of the cash-generating units

exceeds the recoverable amount of the unit, the entity shall recognize the impairment loss, and the

impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of

an impairment loss for goodwill is prohibited.

The Group assesses at the end of each reporting period whether there is any indication that an

impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or

may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill

shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s

recoverable amount since the last impairment loss was recognized. If this is the case, the carrying

amount of the asset shall be increased to its recoverable amount as a reversal of a previously

recognized impairment loss.

(n) Provision

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive

obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be

required to settle the obligation. Provisions are determined by discounting the expected future cash

flows at a pre-tax rate that reflects the current market assessments of the time value of money and the

risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A provision for warranties is recognized when the underlying products or services are sold. The

provision is based on historical warranty data and a weighting of all possible outcomes against their

associated probabilities.

(o) Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their

repurchase price (including all directly accountable costs), net of tax. Gains on disposal of treasury

shares should be recognized under Capital Reserve – Treasury Share Transactions; Losses on disposal

of treasury shares should be offset against existing capital reserves arising from similar types of

treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be

accounted for under retained earnings. The carrying amount of treasury shares should be calculated

using the weighted average of different types of repurchase.

During the cancellation of treasury shares, Capital Reserve – Share Premiums and Share Capital should

be debited proportionately. Gains on cancellation of treasury shares should be recognized under

existing capital reserves arising from similar types of treasury shares; Losses on cancellation of

treasury shares should be offset against existing capital reserves arising from similar types of treasury

shares. If there are insufficient capital reserves to be offset against, then such losses should be

accounted for under retained earnings.



21

(Continued)

(p) Revenue

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the

consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is

recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that

the significant risks and rewards of ownership have been transferred to the customer, recovery of the

consideration is probable, the associated costs and possible return of goods can be estimated reliably,

there is no continuing management involvement with the goods, and the amount of revenue can be

measured reliably. If it is probable that discounts will be granted and the amount can be measured

reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales

agreement. Export sales revenue is recognized at the date of shipment, at which date the related risks

and rewards are transferred to the customers. Domestic sales revenue is recognized at the date of

deliveries received by the customers.

(ii) Lease income

Lease income from an investment property is recognized in income on a straight-line basis over the

lease term. Incentives granted to the lessee to enter into the operating lease are spread over the lease

term on a straight-line basis so that the lease income received is reduced accordingly. Lease income

from a sublease is recognized in other operating income and loss.

(q) Employee benefits

(i)Defined contribution plans

Obligations for contributions made to defined contribution pension plans are recognized as an

employee benefit expense in profit or loss in the periods during which services are rendered by

employees.

(ii)Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The

Group’s net obligation in respect of defined benefit pension plans is calculated separately for each

plan by estimating the amount of future benefit that employees have earned in return for their service

in the current and prior periods; that benefit is discounted to determine its present value. Any

unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate

is the yield at the reporting date on government bonds that have maturity dates approximating the

terms of the Group’s obligations and that are denominated in the same currency in which the benefits

are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method.

When the calculation results in a benefit to the Group, the recognized asset is limited to the total of

any unrecognized past service costs and the present value of economic benefits available in the form

of any future refunds from the plan or reductions in future contributions to the plan. In order to

calculate the present value of economic benefits, consideration is given to any minimum funding

requirements that apply to any plan in the Group. An economic benefit is available to the Group if it

is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the related expense for the portion of the increased benefit

relating to past service by employees is recognized in profit or loss immediately.



22

(Continued)

The remeasurements of the net defined benefit liability(asset) comprising below:

actuarial gains and losses;

return on plan assets, excluding amounts included in net interest of the net defined benefit liability(asset);and

any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability(asset)

The remeasurements of net defined benefit liability(asset) is recognized in other comprehensive income. The Group recognizes the remeasurements of defined benefit plan in the retained earnings.

The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, and any change in the present value of the defined benefit obligation.

(iii) Termination benefits

Termination benefits result from either the Group’s decision to terminate the employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits exist when the company has clearly committed to formal termination of employment plan which has no possibility to call off. Or when the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(iv) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed when the related service is provided.

(r) Share-based payment

The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities over the period that the employees become unconditionally entitled to payment. The liability is re-measured at each reporting date and settlement date. Any changes in the fair value of the liability are recognized as personnel expenses in profit or loss.

(s) Income taxes

Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax. Current and deferred tax shall be recognized as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity or a business combination.



23

(Continued)

Current tax liabilities (assets) for the current and prior periods shall be measured at the amount

expected to be paid to (recovered from) the taxation authorities using the tax rates that have been

enacted or substantively enacted by the end of the reporting period. Net taxes payable (recoverable)

include tax payable, tax refundable, and adjustments of tax payable for prior years.

Deferred tax is the amount of income taxes payable/receivable in future periods in respect of taxable

temporary differences.

A deferred tax shall be recognized for all taxable temporary differences, except to the extent that the

deferred tax liability arises from:

(a) The initial recognition of an asset or liability in a transaction which is not a business combination

and, at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); or

(b) Deductible temporary differences arising from investments in subsidiaries, associates, and interests

in joint ventures where there is a high probability that such temporary differences will not reverse

in the foreseeable future; or

(c) The initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the

period when the asset is realized or the liability is settled based on tax rates that have been enacted or

substantively enacted by the end of the reporting period.

The Group shall offset deferred tax assets and deferred tax liabilities if, and only if:

(a) The Group has a legally enforceable right to set off current tax assets against current tax liabilities;

and

(b) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same

taxation authority on either:

(i) The same taxable entity; or

(ii) Different taxable entities, but where each such entity intends to settle tax assets and liabilities

(where such amounts are significant) on a net basis every year of the period of expected asset

realization or debt liquidation, or to realize the assets and settle the liabilities simultaneously.

A deferred tax asset shall be recognized for the carry forward of unused tax losses and unused tax

credits to the extent that it is probable that future taxable profit will be available against which the

unused tax losses and unused tax credits can be utilized. At the end of each reporting period, an entity

reassesses unrecognized deferred tax assets.

(t) Earnings per share

The Group discloses the basic and diluted earnings per share attributable to ordinary equity holders of

the Company. The calculation of basic earnings per share is based on the profit attributable to the

ordinary shareholders of the Company divided by the weighted-average number of ordinary shares

outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary

shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding

after adjustment for the effects of all dilutive potential ordinary shares, such as convertible bonds.



24

(Continued)

(u) Operating segments

An operating segment is a component of the Group that engages in business activities from which it

may earn revenues and incur expenses, including revenues and expenses relating to transactions with

other components of the Group. Operating results of the operating segment are regularly reviewed by

the Group’s chief operating decision maker to make decisions about resources to be allocated to the

segment and to assess its performance. Each operating segment consists of standalone financial

information.

(5) Significant Accounting Judgments, Estimates, and Assumptions, and Sources of Estimation

Uncertainty

The preparation of the consolidated financial statements in accordance with the IFRSs endorsed by the

FSC requires management to make judgments, estimates and assumptions that may affect the application

of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual

results may differ from these estimates.

Management is required to constantly examine the fairness of those estimates and assumptions. The effect

of a change in accounting estimate shall be recognized prospectively by including it the profit or loss in the

current period or future periods.

Information about assumptions and estimation uncertainties won’t have significant risk of resulting in

material adjustments within the next year.

(6) Explanation of Significant Accounts

(a) Cash and cash equivalents

2015.12.31 2014.12.31

Cash and cash equivalents $ 270 357

Demand deposits 893,084 437,912

Check deposits 4,259 1,999

Time deposits 65,644 326,795

Total $ 963,257 767,063

Please refer to note 6(y) for the analysis of fair value sensitivity and interest rate risk of the financial

assets and liabilities.

(b) Financial assets/liabilities at fair value through profit or loss

(1) Details were as follows:

Financial assets at fair value through profit

or loss: Financial assets/liabilities at fair value through profit or loss

2015.12.31

2014.12.31

Corporate Bond 48,540 61,642

Financial asset held for trade:

Non-hedging derivatives Instrument 1,590 -

Total $ 50,130 61,642

Please refer to note 6(w) for the recognition of gain or loss at fair value.

As of December 31, 2015 and 2014, the Group had no financial assets at fair value through profit or

loss pledged as collateral for loans.

The Group uses derivative instruments to hedge certain currency the Group is exposed to arising from

its operating activities. The Group held the following derivative instruments presented as

held-for-trading financial assets or liabilities:



25

(Continued)

2015.12.31

Contract amount

(Thousand Dollar)

Currency

Maturity period

Swap contract USD 2,000 NTD to USD 2016.01.15~2016.01.29

(c) Available-for-sale financial assets

2015.12.31 2014.12.31

Listed stocks in Taiwan $ 209,967 194,811

Foreign listed stocks 55,282 -

Open-end mutual funds 349,485 295,792

$ 614,734 490,603

Please refer to note 6(x) for the recognition of other comprehensive income at fair value.

If the equity price had changed and had been on the same basis for both years, assuming all other

variables had remained the same, the impact on other comprehensive income would have been as

follows:

2015 2014

Equity price at

reporting date

After-tax other

comprehensive

income

After-tax

profit (loss)

After-tax other

comprehensive

income

After-tax

profit (loss)

Increase 3% $ 16,469 - 12,216 -

Decrease 3% $ (16,469) - (12,216) -

As of December 31, 2015 and 2014, available-for-sale financial assets pledged as collateral for loans

are disclosed in note (8).

(d) Bond investment without active market

2015.12.31 2014.12.31

Certificate Deposit-current $ 1,531 1,497

Current $ 1,014 1,005

Non-current (recorded in other

non-current financial assets)

517

492

$ 1,531 1,497

As of December 31, 2015 and 2014, bond investment without an active market pledged as collateral

for loans are disclosed in note (8).

(e) Financial assets at cost

2015.12.31 2014.12.31

Unlisted stocks $ 185,000 185,000

The financial assets at cost held by the Group are measured at amortized cost at year-end given the

range of reasonable fair value estimates is large and the probability for each estimate cannot be

reasonably determined; therefore, the Group management had determined that the fair value cannot be

measured reliably.

As of December 31, 2015 and 2014, financial assets at cost were not pledged as collateral.



26

(Continued)

(f) Accounts receivable and other receivables

2015.12.31 2014.12.31

Account receivable $ 484,195 462,413

Other receivables-current 31,049 28,644

Other receivables- deposits paid 9,146 9,559

Less: allowance for doubtful accounts (42,427) (42,849)

$ 481,963 457,767

The aging analysis of unimpaired overdue receivables was as follows:

2015.12.31 2014.12.31

1~30 days $ 69,589 52,488

31~90 days 6,561 14,101

91~270 days 4,504 3,570

More than 271 days 583 -

$ 81,237 70,159

The movement in the provision for impairment with respect to trade and note receivables during the

year was as follows:

Separately

assessed

impairment

Collectively

assessed

impairment Total

Balance at January 1, 2015 $ 41,062 1,787 42,849

Recognition of impairment loss 1,070 - 1,070

Reversal of impairment loss (896) (1,321) (2,217)

The Effects of Changes in Foreign

Exchange Rates

704

21

725

Balance at December 31, 2015 $ 41,940 487 42,427

Separately

assessed

impairment

Collectively

assessed

impairment Total


Recognition of impairment loss 22,507 872 23,379

Reversal of impairment loss - (707) (707)

The Effects of Changes in Foreign

Exchange Rates

1,091

90

1,181

Balance at December 31, 2014 $ 41,062 1,787 42,849

The Group considers any change in credit quality of accounts receivable and other receivables from the

date credit was initially granted to the end of the reporting period when recognizing the collectability of

accounts receivable and other receivables. The Group evaluates the customers’ credit and collectible

amounts to estimate the uncollectable amounts, then accrues the allowance for doubtful accounts. The

individual receivables found not to be specifically impaired are further collectively assessed for

impairment by group based on similar risk characteristics.

As of December 31, 2015 and 2014, accounts receivable and other receivables were not pledged as

collateral.



27

(Continued)

(g) Inventories

Financial assets/liabilities at fair value through profit or loss 2015.12.31 2014.12.31

Raw materials $ 180,182 172,722

Work in process 328,336 353,141

Finished goods 321,263 311,554

Inventories in transit 1,033 3,363

Total $ 830,814 840,780

For the years ended December 31, 2015 and 2014, the cost of inventories recognized as operating costs

and expensed were $2,774,133 and $3,311,911, respectively. In 2015 and 2014, the previous

write-down inventories had been sold and the net realizable value of inventories lowered than cost was

no longer existed. The reversal of write-downs amounted to $24,829 and $8,865, respectively and

recognized in the reduction of operating costs.

As of December 31, 2015 and 2014, inventories were not pledged as collateral.

(h) Non-controlling interests' share of subsidiaries

Significant to the Group of the non-controlling interest subsidiaries are as follows;

Name of subsidiaries Principal place

of business

Proportion of non-controlling interest

voting equity

2015.12.31 2014.12.31

Ying Cheng Investment

Corp.

Taiwan 47.5% 47.5%

Emerging Display


Corp.

Samoa 4.2% 4.2%

Summarize above subsidiaries financial information as below which had prepared based on

International Financial Reporting Standards endorsed by FSC. The below financial information was

prior to the offset amount with the Group.

Summarized financial information for Ying Cheng Investment Corp. is as follows,

2015.12.31 2014.12.31

Current Asset 8,343 9,866

Non-Current Asset 150,000 150,000

Current Liability (50) (30)

Non-Current liability - -

Net Asset 158,293 159,836

Non-Controlling equity closing book amount 75,189 75,922

2015 Year 2014 Year

Operating revenue 361 50

Net profit (Net Loss) 266 (2)

Other comprehensive income (1,810) (67)

Comprehensive income (1,544) (69)

Profit attributable to non-controlling interest 127 (1)

Comprehensive income attributable to

non-controlling interest

(733)

(33)



28

(Continued)

2015 Year 2014 Year

Cash flow from operating activities 288 1 Cash flow from investing activities - - Cash flow from financing activities - - Net increase in cash and cash equivalents 288 1

Summarized financial information for Emerging Display International (Samoa) Corp. is as follows, 2015.12.31 2014.12.31

Current Asset 135,002 99,853 Non-Current Asset 21,178 29,980 Current Liability (35,862) (20,249) Non-Current liability - - Net Asset 120,318 109,584

Non-Controlling equity closing book amount 5,053 4,603

2015 Year 2014 Year

Operating revenue 459,579 514,188

Net profit (Net Loss) 12,687 (21,113) Other comprehensive income (1,957) 4,159

Comprehensive income 10,733 (16,954)

Profit attributable to non-controlling interest 533 (887)

Comprehensive income attributable to non-controlling interest

450

(712)

2015 Year 2014 Year

Cash flow from operating activities 7,810 (20,638) Cash flow from investing activities (4,425) (1,499) Cash flow from financing activities - - Effects of changes in foreign exchange rates (296) 326 Net increase in cash and cash equivalents 3,089 (21,811)

(i) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group in 2015 and 2014 are as follows:

Land

Building and

construction

Machinery

and

equipment

Office

equipment

Other

Total

Cost or deemed cost:

Balance at January 1, 2015 $ 50,378 992,833 2,896,845 37,782 138,135 4,115,973

Additions - 3,453 11,229 2,211 33,957 50,850

Reclassification - - 19,282 800 (20,082) -

Disposals - - (217,063) (8,584) (296) (225,944)

Effect of movements in exchange

rates

1,871

(303)

(4,728)

209

(194)

(3,145)

Balance at December 31, 2015 $ 52,249 995,983 2,705,564 32,418 151,520 3,937,734

Balance at January 1, 2014 $ 47,442 986,767 2,921,045 40,784 114,995 4,111,033

Additions - 3,236 7,595 518 47,858 59,207

Reclassification - - 23,502 381 (23,883) -

Disposals - - (63,698) (4,527) (1,047) (69,272)


rates

2,936

2,830

8,401

626

212

15,005

Balance at December 31, 2014 $ 50,378 992,833 2,896,845 37,782 138,135 4,115,973



29

(Continued)

Land

Building and

construction

Machinery

and

equipment

Office

equipment

Other

Total

Depreciation and impairment loss:

Balance at January 1 2015 $ - 712,250 2,669,205 35,491 85,467 3,502,413

Depreciation for the year - 26,144 82,036 1,305 18,662 128,147

Reclassification - - - (154) 154

Disposals loss - - (217,027) (8,312) (296) (225,635)


rates

-

(635)

(4,450)

194

(110)

(5,001)

Balance at December 31 2015 $ - 737,759 2,529,764 28,524 103,877 3,399,924

Balance at January 1 2014 $ - 658,645 2,608,409 37,955 65,071 3,370,080

Depreciation for the year - 51,783 116,585 1,480 21,210 191,058

Disposals loss - - (63,616) (4,526) (1,006) (69,148)


rates

-

1,822

7,827

582

192

10,423

Balance at December 31, 2014 $ - 712,250 2,669,205 35,491 85,467 3,502,413

Carrying amounts:

Balance at December 31, 2015 $ 52,249 258,224 175,800 3,894 47,643 537,810

Balance at January 1, 2014 $ 47,442 328,122 312,636 2,829 49,924 740,953

Balance at December 31, 2014 $ 50,378 280,583 227,640 2,291 52,668 613,560

As of December 31, 2015 and 2014, property, plant and equipment pledged as collateral for short-term,

long-term loans and finance are disclosed in note 8.

(j) Investment property

Land

Building and

construction Total

Cost or deemed cost:





Depreciation and impairment loss:

Balance at January 1, 2015 $ - 13,981 13,981

Depreciation for the year - 361 361

Balance at December 31, 2015 $ - 14,342 14,342

Balance at January 1, 2014 $ - 13,260 13,260

Depreciation for the year - 361 361

Balance at December 31, 2014 $ - 13,981 13,981

Carrying amounts:




Fair value：

Balance at December 31, 2015 $ 28,552

Balance at December 31, 2014 $ 26,495

Investment property is leased to third parties for factory. Each of the leases contains an initial

non-cancellable period of a year. Subsequent renewals are negotiated with the lessee. No contingent

rents are charged. See note 6(o) for further information (including rental income and other direct

operating cost).



30

(Continued)

The fair value of investment property is measured by the finance department. The finance department

has assessed the investment property based on its location and category. The fair value of the

Company’s investment property was determined by Level 3 fair value measurement inputs.

When measuring the fair value of investment property, the Company considered the present value of

net cash flows to be generated from leasing the property. The expected net cash flows were discounted

using the yield to reflect the inherent risk of the net cash flows. In 2015 and 2014, the yields applied to

the net annual rentals to determine the fair value of investment property were 2.9% and 3%,

respectively.

As of December 31, 2015 and 2014, investment property pledged as collateral for short-term,

long-term loans and finance are disclosed in note 8.

(k) Intangible assets

Initial cost and accumulated amortization for intangible assets were as follows:

Patent and other

Computer software cost

Total amount

Initial cost

Balance as of January 1, 2015 $ 6,148 52,959 59,107

Individual acquisition 306 1,232 1,538

Effects of changes in foreign exchange rates - (29) (29)

Balance as of December 31, 2015 $ 6,454 52,959 60,616


Individual acquisition 316 454 770

Effects of changes in foreign exchange rates - 178 178


Amortization

Accumulated balance as of January 1, 2015 $ 4,254 51,896 56,150

Amortization 262 708 970

Effects of changes in foreign exchange rates - (29) (29)

Accumulated balance as of December 31, 2015 $ 4,516 52,575 57,091

Accumulated balance as of January 1, 2014 $ 4,017 51,011 55,028

Amortization 237 709 946

Effects of changes in foreign exchange rates - 176 176

Accumulated balance as of December 31, 2014 $ 4,254 51,896 56,150

Book value






31

(Continued)

For the years 2015 and 2014, the amortization expenses of intangible assets included in statement of

comprehensive income were as follows:

2015 2014

Operating cost $ 571 495

Operating expense 399 451

Total $ 970 946

As of December 31, 2015 and 2014, intangible assets were not pledged as collateral.

(l) Other current assets

The details of other current assets were as follows:

2015.12.31 2014.12.31

Tax refund receivable $ 2,111 2,476

Prepayment for purchases 4,850 7,193

Other prepaid expenses 6,622 6,517

VAT paid 18,294 7,296

Others 1,533 2,624

$ 33,410 26,106

(m) Short-term loans

The details of short-term loans were as follows:

Type 2015.12.31 2014.12.31

Letters of credit $ 9,286 631

Unsecured bank loans 540,000 30,000

Secured bank loans 50,000 -

Total $ 599,286 30,631

Unused lines of credit $ 1,024,682 1,141,888

Interest rates applied 1.18%~1.43% 1.46%~1.51%

Assets pledged as collateral for short-term loans are disclosed in note 8.

(n) Long-term loans

The details of long-term loans were as follows:

Type 2015.12.31 2014.12.31

Secured bank loans $ 291,200 637,000

Less: current portion (72,800) (72,800)

Total $ 218,400 564,200

Unused lines of credit $ - 273,000

Interest rates applied 2.0056% 2.3189%~2.4242%

(i) Collateral for long-term loans

Assets pledged as collateral for long-term loans are disclosed in note 8.

(ii) The violation of loan agreement

In 2015, there were no increases in long-term loans, and the repayments of long-term loans

amounted to $345,800 thousand.



32

(Continued)

The Group signed a 3-year loan contract with E. Sun Bank and six other banks on the purpose of repaying the long-term loans as mentioned above to raise its operating capital. Besides, according to the contract, if the Company does not violate any terms during last three to six months before the contract expires, the Company can extend its term of credit for another two years.

Pursuant to the loan contract, for the duration of the loan, the Company must conform to the predetermined financial covenants involving special financial ratios calculated based on the annual consolidated financial statements. If the special financial ratios cannot meet the requirement, the Company should improve within the nine months after the end of the fiscal year. If the adjusted financial ratios reviewed by the certified accountant meet the requirements, it will not be regarded as breach of the contract. During the period for adjustment, unused lines of credit, excluding the revolving credit extension, will be suspended until such ratios are in compliance with the contract requirement. During the said period, the interest rate would increase to 0.125% unless the majority of the consortium agreed the exemption proposed by the company.

The financial covenants were as follows: i. A maximum debt ratio of 150% should be maintained. ii. A minimum current ratio of 100% should be maintained. iii. A minimum times interest earned ratio of 2.5 should be maintained. iv. Minimum net tangible assets of $1,700,000 should be maintained.

(o) Operating lease

(i)The Group as lessee

Based on current lease terms, future rental commitments of non-cancellable lease are as follows: 2015.12.31 2014.12.31

Less than one year $ 13,285 8,799 Between one and five years 13,444 8,851 $ 26,729 17,650

The Group leases land, several offices, warehouse and factory facilities under operating leases. The leases typically run for a period of 1 to 10 years, with an option to renew the lease after that date. Lease payments are adjusted periodically to reflect market rentals.

The rental expenses of operating lease were $15,047 and $14,462 for the years ended December 31, 2015 and 2014, respectively, included in profit or loss.

The warehouse and factory leases were entered into many years ago as combined leases of land and buildings. The rent paid to the landlord is increased to the market rent at regular intervals, and the Group does not participate in the residual value of the land and buildings. As a result, it was determined that substantially all the risks and rewards of the land and buildings are with the landlord. Therefore, the Company determined that the land and building elements of the warehouse and factory leases are operating leases.

(ii)The Group as lesser

The Group leases out its investment properties to third parties under operating lease please refer to note6 (j). The future minimum lease receivable under non-cancellable leases is as follows:

2015.12.31 2014.12.31

Less than one year $ 158 158

The rental income from investment properties were both $900 in 2015 and 2014. The investment properties did not have any significant maintenance expense.



33

(Continued)

(p) Employee benefits

(i) Defined benefit plan

The defined benefit obligation was as follows:

2015.12.31 2014.12.31

Present value of defined benefit obligations $ 180,918 177,175

Fair value of plan assets (96,147) (89,657)

Net liabilities of defined benefit obligations $ 84,771 87,518

The Group makes defined benefit plan contributions to the pension fund account at Bank of Taiwan

that provides pensions for employees upon retirement. The plan (covered by the Labor Standards

Law) entitles a retired employee to receive a lump-sum payment based on years of service and

average salary for the six months prior to retirement.

1. Composition of plan assets

The Group set aside pension funds in accordance with the legislation from the Ministry of Labor

and managed by the Bureau of Labor Funds. The annual budget for the allocation of the minimum

income cannot be lower than the income calculated based on the interest rate of the banks’

two-year time deposit in accordance with the legislation “Management and Utilization of the

Labor Pension Funds”.

The Group’s labor pension reserve account balance in Bank of Taiwan amounted to $96,147 as of

December 31, 2015. The utilization of the labor pension fund assets includes the asset allocation

and yield of the fund. Please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2. Changes in present value of the defined benefit obligation were as follows:

2015 2014

Balance at January 1 $ 177,175 169,841

Current service and interest cost 4,411 4,607

Remeasurement of the net defined benefit liability

(assets)

－Actuarial loss (gain) on financial assumptions

change

4,042

-

－Experience (4,286) 3,627

Employee benefits paid (424) (900)

Obligation at end of year $ 180,918 177,175

3. Changes in present value of plan assets were as follows:

2015 2014

Fair value of assets at beginning of year $ 89,657 83,920

Expected return on plan assets 1,830 1,726

Remeasurement of net defined benefit liability

(assets)

－Return on plan assets (excluding current interest

cost)

550

242

Contributions made by employer 4,534 4,669

Employee benefit paid (424) (900)

Fair value of plan assets at end of year $ 96,147 89,657



34

(Continued)

4. Cost recognized in profit or loss

2015 2014

Current service cost $ 876 1,210

Interest cost on net defined benefit liability (asset) 1,705 1,671

$ 2,581 2,881

Operating cost $ 2,041 2,267

Selling expenses 77 109

General and administrative expenses 263 288

Research and development expenses 200 217

$ 2,581 2,881

Actual return on assets $ 2,380 1,968

5. Remeasurement of the net defined benefit liability (assets) recognized in other comprehensive

income

The remeasurement of the net defined benefit liability (assets) recognized in other comprehensive

income in 2015 and 2014 was as follows:

2015 2014

Cumulative amount at January 1 $ (29,784) (26,399)

Recognized during the period 794 (3,385)

Cumulative amount at December 31 $ (28,990) (29,784)

6. Actuarial assumptions

The following are the Group’s principal actuarial assumptions:

2015.12.31 2014.12.31

Discount rate at December 31 1.875% 2%

Future salary increases 3% 3%

The expected amount of contributions for the following year after the reporting date is $4,443.

The weighted-average duration of the defined benefit obligation is 21.42 years.

7. Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Company used

judgments and estimations to determine the actuarial assumptions, which included the discount

rate and future salary increase or decrease. Any changes in the assumptions may have a

significant effect on the amount of the defined benefit obligation.

If changes in the respective significant actuarial assumptions occur in 2015, the present value of

the defined benefit obligation would increase (decrease) as follows:

Present value of defined benefit obligation

Increase Decrease

December 31, 2015

Discount rate (change of 0.25%) (7,963) 8,395

Change in future salary (change of 0.25%) 8,199 (7,820)

The sensitivity analysis above analyzing the effects of changes in single assumptions is based on

other assumptions remaining unchanged. In actuality, changes in some assumptions may be linked

together. The sensitivity analysis and calculation of the net pension liability on the balance sheet

were performed using the same approach.



35

(Continued)

(ii) Defined contribution plan

The Group allocates 6% of each employee’s monthly wages to the labor pension personal account at

the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act.

Under this defined contribution plan, the Group allocates a fixed amount to the Bureau of the Labor

Insurance without additional legal or constructive obligations.

The pension benefit of Dong Guan Emerging Display Limited, Emerging Display Technologies Co.,

USA, EDT-Europe ApS, Emerging Display Korea and EDT-Japan Corp. are based on their

respective local regulation of defined contribution plan. The accrued expenses should be recognized

as current expenses. Besides, Ying Dar Investment Development Corp., Bae Haw Investment

Development Corp., Ying Cheng Investment Corp., Emerging Display International (Samoa) Corp.

and Tremendous Explore Corp do not have any employee and pension plan. Therefore, there is no

pension benefit obligation required.

Details of the Group’s pension costs under the defined contribution method were as follows:

2015 2014

Operating Cost $ 22,474 20,429

Selling expenses 4,946 4,879

General and administrative expenses 1,813 1,718

Research and development expenses 2,081 2,043

$ 31,314 29,069

(q)Income tax

(i) The amounts of income tax expense (benefit) were as follows:

2015 2014

Current tax expense $ 4,685 6,963

Deferred tax expense

Origination and reversal of temporary differences 45,822 36,199

Income tax expense $ 50,507 43,162

No income tax was recognized directly in equity in 2015 and 2014.

The amounts of income tax recognized in other comprehensive income in 2015 and 2014 were as

follows:

2015 2014

Unrealized gain (loss) on available-for-sale

financial assets $ 2,570 -



36

(Continued)

Reconciliation of income tax and profit before tax for 2015 and 2014 is as follows.

2015 2014

Income before income tax $ 317,144 213,155

Income tax calculated based on the Company’s tax

rate

$ 53,915 36,236

Effect of overseas income tax differences 2,035 7,173

Income tax already paid abroad 164 190

Tax-exempt income (3,295) (5,367)

Adjustment for prior year (1,630) -

Change in unrecognized temporary differences (2,155) (1,296)

Income Basic Tax 715 2,731

Others 758 3,495

$ 50,507 43,162

(ii) Deferred tax assets and liabilities

1. Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

2015.12.31 2014.12.31

Unrealized inventory valuation and

obsolescence loss $ 12,977

14,966

Others 14,045 14,211

$ 27,022 29,177

2. Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as follows:

Unrealized

exchange gain

Others

Total

Deferred tax liabilities:

Balance at January 1, 2015 $ 2,875 440 3,315

Recognized in profit or loss (611) (165) (776)


Balance at January 1, 2014 $ 1,197 129 1,326

Recognized in profit or loss 1,678 311 1,989




37

(Continued)

Tax loss

carry-forward

Inventory

valuation loss

Unrealized

sales profit Others Total

Deferred tax assets:

Balance at January 1, 2015 $ 69,600 2,536 2,674 7,963 82,773

Recognized in profit or loss (49,806) (1,655) 1,497 3,372 (46,592)

Recognized in other

comprehensive income - - - 2,570 2,570

Balance at December 31, 2015 $ 19,794 881 4,171 13,905 38,751

Balance at January 1, 2014 $ 104,802 2,146 2,947 7,084 116,979

Recognized in profit or loss (35,202) 390 (273) 879 (34,206)

Recognized in other

comprehensive income - - - - -

Balance at December 31, 2014 $ 69,600 2.536 2,674 7,963 82,773

(iii) The ROC Income Tax Act allows net losses, as assessed by the tax authorities, to offset taxable

income over a period of ten years for local tax reporting purposes. As of December 31, 2015, the

loss carryforwards and the years of expiry were as follows:

Year of loss

Unused balance of loss

carryforward Year of expiry

2011 $ 38,868 2021

2012 77,567 2022

$ 116,435

(iv) Approval of income tax

The Group’s income tax returns for all fiscal years up to 2013 have been examined and approved by

the R.O.C. tax authority.

(v) The components of the Group’s unappropriated retained earnings were as follows:

2015.12.31 2014.12.31

1997 and prior years $ - -

1998 and thereafter 216,937 (56,128)

$ 216,937 (56,128)

Balance of imputation credit $ 8,268 2,294

2015 (expected) 2014 (actual)

Tax creditable ratio for earnings distributed to residents

in R.O.C.

3.81%

-

The aforementioned information has been prepared in accordance Tai-Tsai-Suei Letter no.

10204562810 dated October 17, 2013, issued by the Ministry of Finance. From the tax year 2015,

only 50% of the corporate income tax can be credited against the individual income tax. For

taxpayers residing outside the R.O.C., the 10% retained earnings tax can be credited against the

dividend withholding tax once the Group distributes its dividends from the corresponding retained

earnings in subsequent years, but only 50% of the retained earnings tax paid can be credited against

the individual income tax.



38

(Continued)

(r) Share capital and other equity

(i) Common stock

Resolutions were passed during the board meeting held on August 3, September 7, September 30,

and November 2, 2015, for the Company to repurchase 25,200 thousand shares of its stock as

treasury stock. The Company’s Board of Directors approved resolutions to retire treasury stock

amounting to 11,200 thousand shares with a face value of $112,000 on August 27 and October 21,

2015. The related registration procedures had been completed.

As of December 31, 2015, and 2014, the authorized share capital of the Company amounted to

$3,500,000, comprising 350,000 thousand shares with a par value of TWD10 per share. Issued

shares were 214,908 thousand shares and 226,108 thousand shares, respectively. The

weighted-average numbers of shares of common stock outstanding excluded treasury stock and the

common stock held by the Company’s subsidiaries were comprising 192,114 thousand shares and

217,313 thousand shares, respectively.

(ii) Capital surplus

As of December 31, 2015 and 2014, capital surplus was as follows:

2015.12.31 2014.12.31

Expired stock option $ - 6,294

Treasury stock 27,955 -

27,955 6,294

According to the Company Act as amended in January 2012, any realized capital surplus is initially

used to cover any deficit, and the balance, if any, could be transferred to common stock as stock

dividend or distributed as cash based on a resolution approved by the stockholders. Realized capital

surplus includes the premium derived from the issuance of shares of stock in excess of par value and

endowments received by the Company. According to the “Regulations Governing the Offering and

Issuance of Securities by Securities Issuers”, the combined amount of any portions capitalized in any

one year may not exceed 10% of paid-in capital.

On June 2, 2015, the Company’s board of directors approved offsetting the deficit with capital

surplus of $6,294.

(iii) Retained earnings

The Company’s articles of incorporation stipulate that annual earnings shall be appropriated as

follows:

1. Pay income tax;

2. Make up accumulated deficit;

3. Appropriate legal reserve;

4. Appropriate special reserve;

5. 3% of the remainder is distributable as directors’ and supervisors’ remuneration;

6. At least 5% of the remainder is distributable as employee bonuses.

7. If any earnings still exist, the remainder shall be distributed at the discretion of the board of

directors and approved at the stockholders’ meeting.



39

(Continued)

The Company’s industry is in a stable growth phase. It has adopted a residual dividend policy based on its future capital budget plan and operating capital needs. The Company also takes the effects of dilutive potential shares and the effect on ROE into consideration in calculating EPS. Therefore, the distribution policy gives priority to cash dividends and then share dividends. However, the cash dividend distribution should not be lower than 50 percent of the total dividend distribution of the current year.

According to the Company Act which was amended in May 2015, employee bonuses and directors’ and supervisors’ remuneration are no longer categorized as distribution of earnings, and the Company will make all necessary changes to its articles of association before the deadline specified by the authorities. a. Legal reserve

According to the ROC Company Act as amended in January 2012, the Company must retain 10% of its annual income as a legal reserve until such retention equals the amount of paid-in capital. When a company incurs no loss, it may, pursuant to a resolution approved by the stockholders, distribute its legal reserve by issuing new shares or distributing cash for the portion in excess of 25% of the paid-in capital.

b. Special reserve

In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on April 6, 2012, an increase in retained earnings due to the first-time adoption of IFRSs shall be reclassified as a special earnings reserve during earnings distribution, and when the relevant assets are used, disposed of, or reclassified, this special earnings reserve shall be reversed as distributable earnings proportionately.

In accordance with the guidelines of the above Ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of special earnings reserve resulting from the first-time adoption of IFRSs and the carrying amount of other shareholders’ equity as stated above. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

The Company’s retained earnings this year decreased due to the first-time adoption of IFRSs. As of December 31, 2012, the Company had an accumulated deficit; therefore, there is no need to distribute any special reserve.

In accordance with Ruling No. 1010047490 issued by the Financial Supervisory Commission on April 6, 2012, if the market value of the Company’s shares is lower than the carrying value of the Company’s shares held by the subsidiaries at year-end, the Company should retain a special reserve amounting to the difference between the market value and the carrying value, based upon the Company’s ownership percentage in the subsidiaries. When market value rebounds, the Company could reverse the special reserve.

c. Earnings distribution

As of December 31, 2014, the Company had an accumulated deficit and did not have to estimate the amount of employee bonuses and directors’ and supervisors’ remuneration.

Due to an accumulated deficit in 2014, the estimation of employee bonuses and directors’ and supervisors’ remuneration was zero, equal to the actual payment. The related information can be accessed through the Market Observation Post System.

On June 2, 2015, and June 10, 2014, the Company’s stockholders’ meeting decided to use the 2014 and 2013 net income after tax to make up the previous years’ accumulated deficit, with no dividend distribution.



40

(Continued)

(iv) Other equity

Foreign exchange

differences arising

from foreign

operation

Unrealized gains and

losses from

available-for-sale

investment

January 1, 2015 $ 8,133 (45,025)

Foreign exchange differences

(net of taxes)

1,399

-

Unrealized gains and losses from

available-for-sale investment

-

(63,508)

December 31, 2015 $ 9,532 (108,533)

January 1, 2014 $ (140) (49,277)

Foreign exchange differences

(net of taxes)

8,273

-

Unrealized gains and losses from

available-for-sale investment

-

4,252

December 31, 2014 $ 8,133 (45,025)

(v) Treasury stock

From August 4 to December 31, 2015, in accordance with the requirements under section 28(2) of

the Securities and Exchange Act, the Company repurchased 25,200 thousand shares of its own

common stock as treasury shares in order to protect the Company’s integrity and shareholders’

equity. As of December 31, 2015, a total of 14,000 thousand shares were not yet cancelled.

In accordance with Securities and Exchange Act requirements as stated above, the number of shares

repurchased should not exceed 10 percent of all common shares issued. Also, the value of the

repurchased shares should not exceed the sum of the Company’s retained earnings, share premium,

and realized capital reserves. As of June 30 and September 30, 2015, the Company could repurchase

no more than 22,610 thousand shares and 22,110 thousand shares, respectively, with a total value of

no more than $51,136 and $168,037, respectively.

In accordance with Securities and Exchange Act requirements, treasury shares held by the Company

should not be pledged, and do not hold shareholder rights before their transfer.

Ying Dar Corp. and Bae Haw Corp., 100%-owned subsidiaries of the Company, held the Company’s

common stock. In 2015 and 2014, Ying Dar Corp. and Bae Haw Corp. did not purchase or dispose of

any of the Company’s shares. As of December 31, 2015 and 2014, Ying Dar Corp. and Bae Haw

Corp. together held 8,794 thousand shares of the Company’s common stock. As of December 31,

2015 and 2014, their market values amounted to $87,944 and $72,290, respectively.



41

(Continued)

(s) Earnings per share

2015 2014

Basic earnings per share

Profit (loss) attributable to owners of parent $ 265,977 170,881

Weighted-average number of common shares at end of

year (expressed in thousands of shares)

212,510

217,313

Expressed in New Taiwan dollars $ 1.25 0.79

Diluted earnings per share

Profit (loss) attributable to owners of parent $ 265,977 170,881

Weighted-average number of common shares

(expressed in thousands of shares)

212,510

217,313

Effect of potentially dilutive common stock:

－Employee bonus

1,437

-

Weighted-average number of common shares - diluted

(expressed in thousands of shares)

213,947

217,313

Expressed in New Taiwan dollars $ 1.24 0.79

In computing basic earnings (loss) per share of common stock for the years ended December 31, 2015

and 2014, the weighted-average numbers of shares of common stock outstanding excluded 8,794

thousand shares of common stock held by the Company’s subsidiaries as treasury stock.

(t) Revenue

Details of revenue for the years ended December 31, 2015 and 2014 were as follows:

2015 2014

Sales of goods $ 3,476,757 3,919,890

(u) Employee compensation, and directors’ and supervisors’ remuneration

According to the amendment to the Company’s articles of association, which is yet to be approved in

the Annual Stockholders’ Meeting, the Company should contribute no less than 5% of the profit as

employee compensation and a maximum of 3% as directors’ and supervisors’ remuneration when there

is profit for the year. However, certain amounts of the earnings should be reserved if there is an

accumulated loss from operations in previous years in advance of the appropriation of the employee

bonuses. The aforementioned employee bonuses will be distributed in cash or stock to employees who

satisfy certain specifications of the Company and its affiliates.

For the year ended December 31, 2015, the compensation of employees and of directors totaling

$14,371 and $8,623, respectively, was estimated as the Company’s net income before tax, excluding

compensation of employees and of directors, multiplied by the appropriate percentage in compliance

with the Company’s articles. These expenses were recognized in operating costs and operating

expenses during 2015. For any change after the issuance date of the financial statements, the difference

shall be accounted for as a change in accounting estimate and recognized in profit or loss in the

following year.

(v) Other operating income and expenses

Other operating income and expenses were rental revenue.



42

(Continued)

(w) Non-operating income and expenses

(i) Other income

Details of other income in 2015 and 2014 were as follows:

2015 2014

Interest income

Bank deposits $ 4,671 6,980

Other loans and receivables 320 375

Dividend Revenue 13,756 8,637

Others 390 2,761

$ 19,137 18,753

(ii) Other gains and losses

Details of other gains and losses in 2015 and 2014 were as follows:

2015 2014

Foreign exchange gains (losses), net $ 44,488 55,240

Net gains on disposal of investments and financial

liability

Net gains on disposal of Available-for-sale

financial assets

20,362 35,862

Others - (155)

Net gains on disposal of financial assets at fair value

through profit or loss

13,390 10,169

Gains on disposal of property, plant and equipment,

net

844 1,505

Others (69) (3,049)

$ 79,015 $ 99,572

(iii) Finance costs

Details of finance costs in 2015 and 2014 were as follows:

2015 2014

Interest expenses

Bank loans $ 16,136 19,572

(x) Reclassified adjustments of the components in other comprehensive income

Details of the Reclassified adjustments of the components in other comprehensive income in 2015 and

2014 were as follows:

2015 2014

Available-for-sale financial assets

Net change in fair value occurred in current year $ (46,291) 40,728

Net change in fair value reclassified to income (20,647) (36,508)

Net change in fair value recognized in other

comprehensive income

$ (66,938)

4,220



43

(Continued)

(y) Financial instruments

(i) Credit risk

1. Exposure to credit risk

The Group’s maximum exposure to credit risk was the carrying amount of financial assets. As of

December 31, 2015 and 2014, the Company’s maximum exposures to credit risk amounted to

$2,296,345 and $1,963,171, respectively.

2. Concentration of credit risk

To reduce the credit risk of accounts receivable, the Group continuously evaluates customers’

financial condition, and requires customers to provide a guarantee if necessary. The Group

periodically measures the possibility of collecting the accounts receivable and also records an

allowance for doubtful accounts, which is always under the expectation of the management. The

Group has no significant concentration of its accounts receivable as of December 31, 2015 and

2014.

(ii) Liquidity risk

Details of financial liabilities categorized by due dates were as follows. The amounts include interest

expenses but exclude the impacts of negotiated net amounts.

Carrying

amount

Contracted

cash flows

Due within 6 months

Due in

6-12 months Due in

1-2 years Due in

2-5 years Due in

over 5 years

December 31, 2015

Non-derivative financial liabilities

Secured loans $ 341,200 (347,206) (89,072) (38,774) (219,360) - -

Unsecured loans 549,286 (550,095) (550,095) - - - -

Accounts payable 365,174 (365,174) (365,174) - - - -

Notes payable 3,193 (3,193) (3,193) - - - -

Other payable 119,727 (119,727) (119,727) - - - -

$ 1,378,580 (1,385,395) (1,127,261) (38,774) (219,360) - -

December 31, 2014

Non-derivative financial liabilities

Secured loans $ 637,000 (666,242) (43,634) (43,332) (85,315) (493,961) -

Unsecured loans 30,631 (30,670) (30,670) - - - -

Accounts payable 400,258 (400,258) (400,258) - - - -

Notes payable 3,823 (3,823) (3,823) - - - -

Other payable 105,355 (105,355) (105,355) - - - -

$ 1,177,067 (1,206,348) (583,740) (43,332) (85,315) (493,961) -

The Group does not expect that the cash flows could occur significantly earlier or at significantly

different amounts.

(iii) Foreign currency risk

1. Exposure to foreign currency risk

Significant financial assets and liabilities exposed to foreign currency risk were as follows:

2015.12.31 2014.12.31

Foreign currency Exchange rate TWD amount Foreign currency Exchange rate TWD amount

Financial assets

Monetary items

USD $ 40,032 32.825 1,314,035 $ 34,213 31.65 1,082,837

JPY 22,824 0.2727 6,224 118,260 0.2646 31,292

CNY

EUR

13,163

285

4.995

35.88

65,747

10,192

20,681

-

5.092

-

105,310

-

Non-monetary items

USD 11,834 32.825 388,461 8,760 31.65 277,247



44

(Continued)

Financial liabilities

Monetary items

TWD 36 1 36 4,295 1 4,295

USD 9,256 32.825 303,830 10,973 31.65 347,306

JPY 29,200 0.2727 7,963 34,776 0.2646 9,202

2. Sensitivity analysis

The foreign currency risk was mainly incurred from the translation of cash and cash equivalents,

accounts receivable, other receivables, available-to-sale financial assets, loans, accounts payable,

bonds payable and other payables. As of December 31, 2015 and 2014, the exchange rate of the

TWD versus the USD, CNY, and JPY increases or decreases by 1%, given no changes in other

factors, profit after tax will increase or decrease by $9,015 and $7,137, respectively.

3. Exchange gain or loss

The Group has variety kinds of functional currencies, hence we use summarized method to

disclose exchange gain of monetary items. As of December 31, 2015 and 2014, the exchange gain

(including realized and unrealized) that resulted from monetary items translated to the functional

currency was $44,488 and $55,240, respectively.

(iv) Interest rate risk

The sensitivity analysis of interest was made based on the interest rate of derivative and

non-derivative instruments at the reporting date. The analysis of liabilities bearing floating interest

rates was prepared based on the assumption that the outstanding amount at the reporting date had

existed for the whole year.

If interest rates on loans had increased or decreased by 1% with all other variables held constant.

Profit after tax for the years 2015 and 2014 would have been decreased or increased by $113 and

$129, respectively, mainly as a result of liabilities bearing floating interest rates.

(v) Fair value

1. Categories and fair values of financial instruments

The following table shows the carrying amount and fair values of financial assets and financial

liabilities, including their levels in the fair value hierarchy. It does not include fair value

information on financial assets and financial liabilities not measured at fair value if the carrying

amount is a reasonable approximation of fair value and on investments in equity instruments

which do not have any quoted price in an active market.

2015.12.31

Carrying

amount

Fair Value

Level 1 Level 2 Level 3 Total

Financial assets at fair value

through profit or less

ECB $ 48,540 48,540 - - 48,540

SWAP contract 1,590 - 1,590 - 1,590

Subtotal 50,130 48,540 1,590 - 50,130


Stocks in listed companies 265,249 265,249 - - 265,249

Open-end fund 349,485 349,485 - - 349,485

Financial assets carried at cost 185,000 - - - -

799,734 614,734 - - 614,734



45

(Continued)

2015.12.31

Carrying

amount

Fair Value


Loans and receivables

Cash and cash equivalents 963,257 - - - -

Debt instrument without active

market 1,014

-

-

- -

Accounts receivable 454,735 - - - -

Other receivable 18,082 - - - -

Other receivable - refundable

deposits (recognized in other assets -

noncurrent) 9,146

-

-

-

-

1,446,234 - - - -

$ 2,296,098 663,274 1,590 - 664,864

Financial liabilities at amortized cost

Bank loans 890,486 - - - -

Notes payable 3,193 - - - -

Accounts payable 365,174 - - - -

Other payables 120,084 - - - -

$ 1,378,937 - - - -

2014.12.31

Carrying

amount

Fair Value


Financial assets at fair value through

profit or loss

ECB $ 61,642 61,642 - - 61,642


Stocks in listed companies 194,811 194,811 - - 194,811

Open-end fund 295,792 295,792 295,792

Financial assets carried at cost 185,000 -

675,603 490,603 - - 490,603

Loans and receivables

Cash and cash equivalents $ 767,063 - - - -

Debt instrument without active market 1,497 - - - -

Accounts receivable 432,224 - - - -

Other receivable 15,984 - - - -

Other receivable - refundable deposits

(recognized in other assets - noncurrent) 9,559

-

-

-

-

1,226,327 - - - -

$ 1,963,572 552,245 - - 552,245

Financial liabilities at amortized cost

Bank loans 667,631 - - - -

Notes payable 3,823 - - - -

Accounts payable 400,258 - - - -

Other payables 105,355 - - - -

$ 1,177,067 - - - -



46

(Continued)

2. Levels of fair value hierarchy

The Group measures its assets and liabilities use input observable market data. The fair value

hierarchy categorizes the inputs used in valuation techniques as follows:

− Level 1: quoted prices (unadjusted) in the active markets for identified assets or liabilities.

− Level 2: inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

− Level 3: inputs for the asset or liability that are not based on observable market data

(unobservable inputs).

3. Valuation techniques and assumptions unused in fair value determination

Because of the short maturities of these instruments, the Group estimates that the carrying amount

is a reasonable approximation of fair value.

4. Valuation techniques and assumptions used in fair value determination

Non-derivative instruments

If a financial instrument has a quoted price in an active market, the quoted price is used as fair

value. Quoted prices of major stock exchanges and quoted prices of government bonds are the

basis for measuring the fair value of stocks listed on an exchange, stocks listed on the OTC, and

debt instruments with quoted prices in an active market.

A financial instrument is regarded as having a quoted price in an active market if quoted prices

are readily and regularly available from an exchange, dealer, broker, industry group, pricing

service or regulatory agency, and if those prices represent actual and regularly occurring market

transactions on an arm’s-length basis. Otherwise, the market is deemed to be inactive.

The fair values of the Group’s bonds, listed securities, and open-end funds with standard terms

and conditions and traded in active markets were determined by the quoted market prices.

Derivative instruments

The fair value of forward exchange contracts is based on quoted prices from the counterparty.

5. Transfer between level 1 and level 2

There was no transfer between the fair value hierarchy levels for the years ended December 31,

2015 and 2014.

(z) Financial risk management

1. The extent of risk exposure arising from the use of financial instruments was as follows:

(i) Credit risk

(ii) Liquidity risk

(iii) Market risk

The Group’s risk management objective, policies and procedures and the exposure risk arising from

the aforementioned risks are disclosed below. For more quantitative information, please refer to

other notes to the consolidated financial statements.



47

(Continued)

2. Risk management framework

The Board of Directors has the overall responsibility for the establishment and oversight of the

Group’s risk management framework. Every department is responsible for planning and controlling

the risk management of the Company’s operation and reports it to the Board regularly.

The Group’s risk management policies are established to identify and analyze the risks faced by the

Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk

management policies and systems are reviewed regularly to reflect changes in market conditions,

products and services offered. The Group, through its training and management standards and

procedures, aim to develop a disciplined and constructive control environment, in which all

employees understand their roles and obligations.

The supervisor of the Group oversees how the management complies in monitoring the Group’s risk

management policies and procedures and reviews the adequacy of the risk management framework

in relation to the risks faced by the Group. The supervisor is assisted in its oversight role by an

internal Audit. An Internal Audit undertakes both regular and ad hoc reviews of risk management

controls and procedures, the results of which are reported to the Board of Directors.

3. Credit risk

Credit risk is the risk of financial loss of the Group if a customer or counterparty to a financial

instrument fails to meet its contractual obligations, which arises principally from the Group’s

accounts receivable, bank deposits and foreign exchange derivative instruments.

(1) Accounts receivable and other receivables

The credit risk is impacted by the individual situation of each client. The Group continuously

monitors the information concerning client credit risk factors, such as the default risk of the

industries and countries in which the customers operate.

According to the credit policy, the Group has to evaluate the credit of each new customer before

setting the payment and delivery terms. The evaluations include external credit ratings, if

available, and bank references. The Group reviews credit limits periodically and requires

customers to pay in advance when the customers’ credit ratings did not meet the benchmark.

The Group established an impairment allowance that represents its estimate of incurred losses in

respect of accounts receivable and other receivables. Major components of this impairment

allowance are specific loss component that relates to individually significant exposure and

collective loss component, wherein, the loss is incurred but not identified. The collective

component is based on historical payment experience of similar financial assets.

(2) Investments

The credit risk exposure in the bank deposits and derivative financial instruments are measured

and monitored by the finance department. Since the Group’s transactions were with financial

institutions with good credit ratings, there were no noncompliance issues, and therefore, there is

no significant credit risk. Investments in other financial instruments are measured and monitored

by the finance department with the instruction from the chairman to ensure each risk of

investment target is under the Group’s affordable level.



48

(Continued)

4. Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liability when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group reputation.

As of December 31, 2015 and 2014, the Group has unused credit facilities for short-term amounting to $1,024,682 and $1,414,888, respectively.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control the market risk exposures within acceptable parameters, while optimizing the return.

The Group engages in derivative financial instruments trading in order to manage the market risk, thus, generating financial liabilities or financial assets, all the execution of those transactions were under the Board’s instruction.

(1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan dollar TWD), US dollar (USD), Japan Yen (JPY), Danish Krone (DKK), China Yuan (CNY) and Korean Won (KRW). The currencies used in these transactions are the TWD, USD, JPY and CNY.

At any point of time, the Group’s principle is to hedge using the net values after offsetting payables and receivables or assets and liabilities which are generated by business operation and which are less than six months. The Group mainly hedges its currency risk using the foreign exchange agreements wherein the maturity date is less than 6 months.

The interest is denominated in the same currency as borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily the New Taiwan Dollars (TWD) and US Dollars (USD).

When the assets and liabilities denominated in a currency other than a functional currency had a short-term imbalance, the Group should purchase or sell foreign currencies at the spot rate on the transaction date in order to maintain an acceptable exposure to currency risk.

(2) Interest risk

The Group adopts a policy to ensure the exposure of changes in interest rates on borrowings is evaluated by the trend in market interest rates. The Group can manage its interest risk through maintaining an appropriate portfolio of floating interest rate and fixed interest rate.

(3) Other market price risk

The Group is exposed to equity price risk due to the investments in equity instruments that contain unsure future prices. Therefore, the Group monitors and manages the equity investments by holding different investment portfolio and regularly updating the information of equity instruments.



49

(Continued)

(aa) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. Capital consists of ordinary shares,

non-redeemable preference shares, retained earnings and non-controlling interests of the Group. The

Board of Directors monitors the return on capital as well as the level of dividends to ordinary

shareholders.

The Group meets its objectives in managing its capital to safeguard the capacity to continue to operate,

to continue to provide a return on shareholders and interest of other related parties and to maintain an

optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to the

shareholders, reduce the capital for redistribution to shareholders, issue new shares or sell assets to

settle any liabilities.

The Group and other entities in the same industry use the debt-to-equity ratio to manage their capital.

This ratio is the total net debt divided by the total capital. The net debts from the balance sheet are

derived from the total liabilities, less cash and cash equivalents. However, the net debts are also

derived by deducting available-for-sale financial assets－current and financial assets at fair value

through profit or loss－current. The total capital and equity include share capital, capital surplus,

retained earnings, other equity, and non-controlling interest, plus net debt since 2015.

The Group’s debt-to-equity ratios at the reporting date were as follows:

2015.12.31 2014.12.31

Net debt $ 16,743 650,036

Total equity $ 2,116,069 2,132,593

Debt-to-equity ratio 0.79% 30.48%

(7) Transactions with Related Parties

(a) Relationship

The Company is the ultimate controlling party of the Group.

(b) Compensation of key management personnel

The information on key management personnel compensation was as follows:

2015 2014

Short-term employee benefits $ 29,407 20,148

Post-employment benefits 572 565

Other long-term benefits - -

Termination benefits - -

Share-based payments - -

$ 29,979 20,713

The Group provided five and four of their own cars and another rental car for their key management

personnel to use. The book value of those cars amounted to $10,487 and $9,360, respectively, and the

rental expense of the other rental car amounted to $905 and $881, respectively, in 2015 and 2014.



50

(Continued)

(8) Pledged Assets

The details and carrying values of pledged assets were as follows:

Pledged assets Purpose 2015.12.31 2014.12.31

Bond investments without

active market －current－time deposits

Guarantee for customs and

government grants

$

1,014

1,005

Property, plant and

equipment－buildings

Guarantee for long-term

borrowings

240,645

259,987

Property, plant and

equipment－machinery

and equipment

Guarantee for short-term and

long-term borrowings

106,658

160,295

Investment property Guarantee for short-term

borrowings

14,638

14,998

Other financial assets－noncurrent－time deposits

Guarantee Letter of Credit for

lease contract

517

493

$ 363,472 436,778

(9) Commitments and Contingencies

(a) As of December 31, 2015 and 2014, The Group’s unused letters of credit for purchases of raw

materials, machinery and equipment amounted to $27,457 and $24,317, respectively.

(b) As of December 31, 2015 and 2014, The Group has signed contracts for the purchase of equipments.

The unrecognized contingencies of contracts for the purchase of property, plant and equipment

amounted to $3,221 and $4,382, respectively.

(c) As of December 31, 2015 and 2014, The Group’s acceptance credit for purchases of raw materials,

machinery and equipment amounted to $11,174 and $16,364, respectively.

(10) Losses Due to Major Disaster: None

(11) Significant Subsequent Event:

On February 15, 2016, the Company’s board of the directors approved the repurchase of common stock

for transferring shares to its employees. The Company expects to repurchase 12,000 thousand shares from

February 16 to April 15, 2016.

(12) Others

(a) The details of the Group’s employee expenses, depreciation, and amortization were as follows:

2015 2014

Recorded as

operating cost

Recorded as

operating

expenses

Total Recorded as

operating cost

Recorded as

operating

expenses

Total

Employee expenses:

Salaries and wages 423,132 192,440 615,572 448,950 173,963 622,913

Labor and health insurance 42,070 12,529 54,599 41,000 11,448 52,448

Pension expense 24,514 9,381 33,895 22,696 9,254 31,950

Other personnel cost 29,986 5,983 35,969 26,332 5,557 31,889

Depreciation 122,401 6,107 128,508 179,959 11,460 191,419

Amortization 572 398 970 495 451 946



51

(Continued)

(13) Supplementary Disclosure Requirements

In accordance with the ROC “Guidelines Governing the Preparation of Financial Reports by Securities

Issuers”, the required disclosures for the year ended December 31, 2015 were as follows:

(a) Information on significant transactions:

(1) Loans extended to other parties: None

(2) Guarantees provided to other parties: None

(3) Securities owned as of December 31, 2015 (subsidiaries, associates and joint ventures not included):

Name of security

holder Name of security and

type

Relationship

between

the investee

and the

Company

Financial statement

account

December 31, 2015 Highest shareholding

during the year

Remarks Units

(shares)

Carrying

value Ratio

Market

value (or

net equity

value)

Units

(shares) Ratio

The Company Ascendax Venture Capital Corp. stock

- Financial assets carried at cost－noncurrent

1,000,000 10,000 5.00% - 1,000,000 5.00% -

The Company Chenfeng Optronics Corp. stock


1,000,000 25,000 2.23% - 1,000,000 2.23% -

The Company Epistar Corp., Ltd ECB

- Financial assets at fair value through profit or loss

500,000 16,207 - 16,207 500,000 - -

The Company Taiwan Glass Inc., Ltd. ECB

- Financial assets at fair value through profit or loss

1,000,000 32,333 - 32,333 1,000,000 - -

The Company Apple Inc. stock - Available-for-sale financial assets－current

16,000 55,282 - 55,282 16,000 -

The Company Innolux Corp. stock - Available-for-sale financial assets－current

1,147,089 11,402 0.01% 11,402 1,147,000 0.01% -

The Company Shian Yih Electronic Co., Ltd. stock

- Available-for-sale financial assets－current

480,000 6,504 0.78% 6,504 480,000 0.78% -

The Company Hon Hai Precision Co., Ltd. stock


525,000 42,420 - 42,420 525,000 - -

The Company Coasia Microelectronics Corp.


386,610 7,365 0.32% 7,365 386,610 0.32% -

The Company Radiant Opto-Electronics Corp. stock


250,000 18,850 0.05% 18,850 250,000 0.05% -

The Company Siliconware Precision Industries Co., Ltd. stock


333,000 17,416 0.01% 17,416 333,000 0.01% -

The Company Taiwan Cement Corp., Ltd. stock


300,000 8,190 - 8,190 300,000 - -

The Company Mega Financial Holding Co., Ltd stock


555,000 11,794 - 11,794 555,000 - -

The Company Fubon Financial Holding Co., Ltd. stock


300,000 13,500 - 13,500 300,000 - -

The Company Synnex Technology International Co. , Ltd. stock


452,000 14,486 0.03% 14,486 452,000 0.03% -

The Company King Yuan Electronics Co., Ltd. stock


570,000 12,284 0.05% 12,284 570,000 0.05% -

The Company Far Eas Tone Telecommunications Co., Ltd. stock


200,000 13,520 0.01% 13,520 200,000 0.01% -

The Company Pegatron Co., Ltd. stock


216,000 15,552 0.01% 15,552 216,000 0.01% -

The Company Yuanta Asia Pacific ex-Jpn Invt Grd Govt Bd Idx


2,000,000 17,896 - 17,896 2,000,000 - -

The Company Edmond de Rothschild Europe Convertibles


8,468.12 26,184 - 26,184 8,468.12 - -

The Company JPM Global Income A (acc)


11,945.82 62,034 - 62,034 11,945.82 - -

The Company JPMorgan Asia Pacific Income Fund A (mth)


97,195.14 88,758 - 88,758 97,195.14 - -



52

(Continued)

Name of security

holder Name of security and

type

Relationship

between

the investee

and the

Company

Financial statement

account

December 31, 2015 Highest shareholding

during the year

Remarks Units

(shares)

Carrying

value Ratio

Market

value (or

net equity

value)

Units

(shares) Ratio

The Company Franklin Templeton Investment Funds - Templeton Global Bond Fund Class A (acc)


46,357.62 41,999

- 41,999 46,357.62 - -

The Company UBS (Lux) Strategy Fund - Balanced


372.66 33,226 - 33,226 372.66 - -

The Company Allianz Income and Growth - AT Acc


70,900.06 31,162 - 31,162 70,900.06 - -

The Company Fidelity Funds - Euro Balanced Fund


88,226.18 32,233 - 32,233 88,226.18 - -

The Company Henderson Horizon Fund - Euroland Fund


42,625.75 15,993 - 15,993 42,625.75 - -

Ying Dar Investment Development Corp.

Shian Yih Electronic Co., Ltd. stock


550,000 7,453 0.09% 7,453 550,000 0.9% -


AGV Products Corporation stock


100,000 898 0.02% 898 100,000 0.02% -


The Company’s stock The Company Available-for-sale financial assets－noncurrent

5,346,672 53,467 2.49% 53,467 5,346,672 2.49% Note

Bae Haw Investment Development Corp.



380,000 5,149 0.62% 5,149 380,000 0.62% -


The Company’s stock The Company Available-for-sale financial assets－noncurrent

3,447,716 34,477 1.60% 34,477 34,478 1.6% Note


Everest Technology Inc.


1,000,000 - 1.47% - 1,000,000 1.47% -

Ying Cheng Investment Corp



235,000 3,184 0.38% 3,184 235,000 0.38% -

Ying Cheng Investment Corp.

Chenfeng Optronics Corp. stock


6,000,000 150,000 13.38% - 6,000,000 13.38% -

Note: It was eliminated in the consolidation.

(4) Accumulated trading amount of a single security in excess of $300 million or 20% of the

Company’s issued share capital: None

(5) Acquisition of property, plant and equipment in excess of $300 million or 20% of issued share

capital: None.

(6) Disposal of property, plant and equipment in excess of $300 million or 20% of issued share capital:

None.



53

(Continued)

(7) Sales to and purchases from related parties in excess of $100 million or 20% of issued share capital was as follows:

Purchasing

(selling)

company

Counterparty Relation-

ship

Details of transaction Circumstances of and reasons for deviation from regular trading

conditions

Resulting receivables

(payables)

Remarks Purchase

(sale) Amount

% of net

purchases

(sales)

Credit

line Unit price Period for credit Balance

% of notes

and accounts

receivable

(payable)

The Company Emerging

Display

Technologies

Co., U.S.A.

Subsidiary of the

Company

Sale 1,620,306 (47.76)% 3 months Sales prices offered to Emerging

Display Technologies Co., U.S.A. was

not significantly different from those

offered to other customers.

Collection terms offered to Emerging

Display Technologies Co., U.S.A.

was not significantly different from

other customers.

395,302

64.65% (Note)

The Company Tremendous

Explore Corp.

Subsidiary of the

Company

Purchase

(processing

cost)

464,571 27.91% 1-3 months Tremendous Explore Corp. is the only

entity the subsidiary provides

processing service to. There is no

comparable transaction.

The Company is the only entity the

subsidiary provides processing

service to.

(96,904) (28.22)% (Note)

Emerging

Display

Technologies

Co., U.S.A.

The Company Subsidiary of the

Company

Purchase 1,620,306 99.61% 3 months The Company is the major supplier for

Emerging Display Technologies Co.,

U.S.A. There is no comparable

transaction.

The Company is the major supplier

for Emerging Display Technologies

Co., U.S.A.

(395,302)

(100.00)% (Note)

Tremendous

Explore Corp.

The Company Subsidiary of the

Company

Sale

(processing

revenue)

464,571 (100.00)% 1-3 months The Company is the only entity the

subsidiary provides processing service

to. There is no comparable transaction.

The Company is the only entity the

subsidiary provides processing

service to.

96,904

100.00% (Note)

Tremendous

Explore Corp.

Dong Guan

Emerging

Display Limited

Subsidiary of the

Company

Purchase

(processing

cost)

459,579 100.00% 1-3 months Tremendous Explore Corp. is the only

entity Dong Guan Emerging Display

Limited provides processing service


Tremendous Explore Corp. is the

only entity Dong Guan Emerging

Display Limited provides processing

service to.

(19,181)

(30.48)% (Note)

Dong Guan

Emerging

Display Limited

Tremendous

Explore Corp.

Subsidiary of the

Company

Sale

(processing

revenue)

459,579 (100.00)% 1-3 months Tremendous Explore Corp. is the only

entity Dong Guan Emerging Display

Limited provides processing service


Tremendous Explore Corp. is the

only entity Dong Guan Emerging

Display Limited provides processing

service to.

19,181

100.00% (Note)




54

(Continued)

(8) Receivables from related parties in excess of $100 million or 20% of issued share capital were

as follows: Name of

company

that has the

receivables

Counterparty Relationship Balance of

amount

Turnover

ratio

Overdue Amount

collected in the

subsequent period

Allowance for

doubtful

accounts

Remarks

Amount Status

The Company Emerging

Display

Technologies

Co., U.S.A.

Subsidiary of the

Company

Accounts

receivable of

$395,302

4.33 - - 138,913 - (Note)


(9) Derivative financial instrument transactions:

The derivative financial instruments are intended to manage the market risk resulting from the

fluctuations in the exchange rate in operating activities. Please refer to note 6(b).

(10) Significant inter-company transactions: Details of transaction

No. Name Counterparty Relationship

(Note) Subjects Amount Term of trading

% of total consolidated

revenue or total asset

0 The Company Emerging Display

Technologies Co.,

U.S.A.

1 Sales revenue

Accounts receivable

1,620,306

395,302

No significant collections term

difference between other customers and

Emerging Display Technologies Co.,

U.S.A.

46.42%

10.51%

0 The Company Tremendous

Explore Corp.

1 processing cost

Accounts payable

464,571

96,904

Supplies on its behalf could not be

compared to those offered to third-party

customers

13.31%

2.58%


Technologies Co.,

U.S.A.

1 Selling expenses

-Commission

Other payable

2,075

765


compared to those offered to third

0.06%

0.02%

0 The Company EDT-Europe ApS 1 Selling expenses

-Commission Other

payable

42,830

4,119



1.23%

0.11%


Technologies

Korea Corp.

1 Selling expenses

-Commission

4,238



0.12%

0 The Company EDT-Japan Corp. 1 Selling expenses

-Commission

Other payable

15,720

1,436



0.45%

0.04%

5 Tremendous

Explore Corp.

The Company 3 Processing revenue

Accounts receivable

459,579

19,181

No non-related-party transaction to

compare to.

13.17%

0.51%

5 Tremendous

Explore Corp.

Dong Guan

Emerging Display

Limited

3 Outsourcing cost

Accounts payable

384,394

No non-related-party transaction to

compare to.

11.01%

Note: Relationship notes as follows,

1. Parent company to subsidiary

2. Subsidiary to parent company

3. Subsidiary to subsidiary



55

(Continued)

(b) Information on investees

Relevant information about investees is as follows: (excluding investments in Mainland China)

Name of investor

Name of investee Location Business

scope

Original cost of investment Balance as of December 31, 2015 Net income (loss) of the

investee

Investment income (less) recognized

Highest shareholding during the year

Remarks December 31,

2015 December 31,

2014 Shares owned

Percentage owned

Carrying value

Units (shares)

Ratio

The Company Emerging Display Technologies Co., U.S.A.

USA Trading 121,656 121,656 3,500,000 100.00% 65,222 (Note1)

2,166 2,359 3,500,000 100.00%

Subsidiary (Note 2)

The Company Emerging Display International (Samoa) Corp.

Samoa

Investment holding

180,503 180,503 5,984,071 78.49% 94,277 12,687 10,279 5,984,071 78.49% Subsidiary (Note 2)

The Company EDT-Europe ApS

Denmark Trading 2,077 2,077 125,000 100.00% 1,577 134 134 125,000 100.00%

Subsidiary (Note 2)

The Company Tremendous Explore Corp.

BVI Trading - - 50,000 100.00% (4,564) (596) (596) 50,000 100.00%

Subsidiary (Note 2)

The Company EDT-Korea

Korea Trading 1,677 1,677 58,212,500

100.00% 1,033 31 31 58,212,500 100.00%

Subsidiary (Note 2)

The Company EDT-Japan Japan Trading 17,401 17,401 5,000 100.00% 8,498 1,825 1,825 5,000 100.00%

Subsidiary (Note 2)

The Company Ying Dar Investment Development Corp.

Taiwan Investment 89,000 89,000 8,900,000 100.00% 22,789 1,476 1,476 8,900,000 100.00%

Subsidiary (Note 2)

The Company Bae Haw Investment Development Corp.

Taiwan Investment 89,000 89,000 8,900,000 100.00% 23,749 1,931 1,931 8,900,000 100.00%

Subsidiary (Note 2)

The Company Ying Cheng Investment Corp.

Taiwan Investment 84,000 84,000 8,400,000 52.50% 83,104 266 140 8,400,000 52.50% Subsidiary (Note 2)


Emerging Display International (Samoa) Corp.

Samoa

Investment holding

13,234 13,234 450,000 5.90% 7,099 12,687 - 450,000 5.90% Subsidiary (Note 2)


Emerging Display International (Samoa) Corp.

Samoa

Investment holding

25,488 25,488 870,000 11.41% 13,728 12,687 - 870,000 11.41%

Subsidiary (Note 2)

Note 1: It was deducted unrealized profit from sales $24,531.

Note 2: It was eliminated in the consolidation.



56

(Continued)

(c) Information on investments in Mainland China:

(1) Related information regarding investments in Mainland China

The related information regarding the Company’s investments in Mainland China is summarized as follows:

Investee

company

Main businesses

and products

Received capital

Investment method

Accumulated

amount invested

in Mainland

China as of Jan.

1, 2015

Invested capital

remitted from or

repatriated to

Taiwan

Accumulated amount invested

in Mainland

China as of Jan. 1,

2015

Net income of

investee

The

Company’s

direct or

indirect

investment

ratio

Investment

gain (loss)

recognized by the

Company

Book

value of

the

investment

as of

December

31, 2015

Accumulated

investment

income repatriated to

Taiwan as of

December 31, 2015 Remittance Repatriation

Dong Guan Emerging

Display Limited

Manufacturing of LCDs

248,516 (US$7,625,300)

Investing through a third country by

establishing a

holding company in a third country.

219,225 (US$6,746,936)

(Note 1)

-

-

219,225 (US$6,746,936)

12,417 95.80%

(Note 2)

12,216 Based on the

investee’s financial

statements audited by the same auditor

as the Company

(Note 3)

105,911

(Note 4)

-



57

(Continued)

(2) Upper limit on investment in Mainland China

Accumulated investment amount remitted from Taiwan to Mainland

China as of December 31, 2015

Investment amount approved by the Investment Commission, Ministry of Economic Affairs

(Note 8)

Limit on investment in Mainland China set by the Investment

Commission, Ministry of Economic Affairs

227,630 (US$6,934,668)

(Note 5)

457,966 (US$13,951,732)

(Note 6)

1,302,186 (Note 7)

Note 1: The amount includes $13,234 which was invested by Ying Dar Investment Development

Corp. and $25,488 which was invested by Bae Haw Investment Development Corp.

Note 2: The ratio includes 5.90% which was held by Ying Dar Investment Development Corp. and 11.41% which was held by Bae Haw Investment Development Corp.

Note 3: The amount includes a loss of $733 which was recognized by Ying Dar Investment

Development Corp. and a loss of $1,417 which was recognized by Bae Haw Investment Development Corp.

Note 4: The amount includes $6,523 which was invested by Ying Dar Investment Development Corp. and $12,614 which was invested by Bae Haw Investment Development Corp.

Note 5: The amount includes the remaining capital amounting to $6,589 (US$187,732) of Emerging Technologies Int’l Trading (Shanghai) Co., Ltd. remitted back after it had completed liquidation in 2009.

Note 6: The approved amount includes US$637,732 obtained from Ying Dar Investment Development Corp. and US$870,000 obtained from Bae Haw Investment Development Corp. The amount obtained from Ying Dar Investment Development Corp. includes the remaining capital amounting to $6,589 (US$187,732) of Emerging Technologies Int’l Trading (Shanghai) Co., Ltd. remitted back after it had completed liquidation in 2009.

Note 7: The amount includes $45,754 for Ying Dar Investment Development Corp. and $34,936 for Bae Haw Investment Development Corp.

Note 8: Transactions denominated in foreign currencies were recorded using the rate of exchange at December 31, 2015.

(3) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of the consolidated financial statements, are disclosed in “Information on significant transactions”.

(14) Segment Information

(a) General information

The Group has three reportable segments: the domestic segment, the North America segment and the mainland China segment. The domestic segment includes sales division, research develop division and manufacturing division. It engages in designing, manufacturing and selling of liquid crystal displays modules and capacitive touch panel, and functions as operating headquarters of the Group. The North America segment engages mainly in expanding the North American trading business and implements

marketing function in North America. The North America segment engages in the sale of liquid crystal displays provided by the domestic segment. The mainland China segment engages in the manufacture of processing raw materials and supplies provided by the domestic segment and it deals mainly in the business of manufacturing liquid crystal display modules and capacitive touch panel.



58

(Continued)

(b) Information which should be reported includes the segment income, segment assets, and segment

liabilities, and their measurement basis and reconciliation information

The reported amounts are consistent with the management reports adopted by decision makers. There

was no material inconsistency between the accounting policies of reportable segments and the

accounting policies described in note 4. The reportable segments’ income was measured using the

operating income before tax, which was also used as the basis for performance evaluation. Sales and

other transactions among consolidated entities were considered as transactions with third parties and

they are measured based on the market value.

Reportable segment information is as follows:

2015

Domestic

North

America

Mainland China

Other operating

department

Adjustments and

eliminations

Total

Revenue Sales to customers other than consolidated entities

$

1,756,780

1,719,269

-

708

-

3,476,757

Sales among consolidated entities

1,620,306

2,075

924,149

62,788

(2,609,318)

-

Interest revenue 4,935 16 37 3 - 4,991

Total revenue $ 3,382,021 1,721,360 924,186 63,499 (2,609,318) 3,481,748

Interest expenses $ 16,125 - - 11 - 16,136

Depreciation and amortization

$

115,975

696

12,702

425

(320)

129,478

Segment income $ 298,436 1,504 14,628 2,062 514 317,144

Segment assets $ 3,672,739 497,154 169,076 20,229 (598,265) 3,760,933

Segment liabilities $ 1,650,886 408,605 63,086 9,121 (486,834) 1,644,864

2014

Domestic

North America

Mainland China

Other operating

department abroad

Adjustments and

eliminations

Total

Revenue Sales to customers other than consolidated entities

$

2,196,267

1,723,275

-

348

-

3,919,890

Sales among consolidated entities

1,613,674

2,211

1,033,278

61,745

(2,710,908)

-

Interest revenue 6,930 32 392 1 - 7,355

Total revenue $ 3,816,871 1,725,518 1,033,670 62,094 (2,710,908) 3,927,245

Interest expenses $ 19,572 - - - - 19,572

Depreciation and amortization

$

175,540

826

15,926

419

(345)

192,366

Segment income $ 233,028 4,636 (25,032) (597) 1,120 213,155

Segment assets $ 3,450,176 451,073 215,594 17,316 (584,467) 3,549,692

Segment liabilities $ 1,418,450 367,854 119,471 8,304 (496,980) 1,417,099



59

(Continued)

The following is the explanation of material reconciliation item:

1. For the years ended December 31, 2015 and 2014, the operating segments revenue eliminated from the consolidated entities were $2,609,318 and 2,710,908, respectively.

2. For the years ended December 31, 2015 and 2014, the operating segments depreciation and amortization eliminated from the consolidated entities were $320 and 345, respectively.

3. For the years ended December 31, 2015 and 2014, the operating segments profit and loss eliminated from the consolidated entities were $514 and 1,120, respectively.

4. For the years ended December 31, 2015 and 2014, the operating segments assets eliminated from the consolidated entities were $598,265 and 584,467, respectively.

5. For the years ended December 31, 2015 and 2014, the operating segments liabilities eliminated from the consolidated entities were $486,834 and 496,980, respectively.

(c) Products and services information

Sales to customers other than consolidated entities, classified by products and services, were as follows: Production 2015 2014

Liquid crystal display modules $ 2,448,029 2,557,916 Capacitive touch panel and capacitive touch panel

Module 979,609 1,276,786

Liquid crystal display panel 33 440 Other 49,086 84,748

$ 3,476,757 3,919,890

(d) Geographic information

Sales to customers other than consolidated entities, classified by location of customers, were as follows: Geographic Area 2015 2014

Mainland China $ 1,044,173 1,645,331 Europe 1,093,679 956,994 USA 921,543 700,047 Japan 133,332 184,512 Taiwan 192,615 312,308 Korea 46,554 33,702 Other 44,861 86,996

$ 3,476,757 3,919,890

Non-current assets, classified by location of assets, were as follows: Geographic Area 2015 2014

Taiwan $ 474,057 544,118 Mainland China 17,611 25,724 USA 66,453 64,163 Europe 544 1,039 Japan 78 95

$ 558,743 635,139

Non-current assets included in Property, plant and equipment, investment property, intangible assets and other assets, excluding financial instrument and deferred tax assets.

(e) Major customers’ information 2015 2014

A from location USA $ 359,415 272,653 B from location Taiwan $ 354,449 276,553

emerging display technologies corp 2015 consolidated... · emerging display technologies corp. and...

Documents